Benefits provided under the Canada-Québec Subsidiary Agreement on Industrial Development and the Société de Développement Industriel du Québec

9.27 Canada asserts that the phrase "benefits provided" is not sufficiently specific for the purpose of Article 6.2, since it is not clear which aspect of these programmes, or which activities or transactions under these programmes, are considered by Brazil to confer a "benefit".

9.28 Brazil argues that Canada was on notice of these matters, since its claims concerning benefits under the abovementioned programmes were included in Brazil's request for consultations and were on the table for discussion. Brazil asserts that Canada failed to provide details of the Canada - Québec Subsidiary Agreements on Industrial Development ("Subsidiary Agreements") or the Société de Développement Industriel du Québec ("SDI") during consultations, and that it would be contrary to the letter and spirit of both the consultation provision and Article 6.2 of the DSU to reward Canada's failure to disclose freely the facts of these programmes by limiting the scope of the Panel's jurisdiction.

(ii) Evaluation by the Panel

9.29 We will consider the preliminary issue raised by Canada in light of the following general observations. First, we note that Canada refers on a number of occasions⁵⁰⁹ to the accelerated timetable of a "fast-track" case, suggesting that any impact on Canada's due process rights caused by the alleged absence of specificity in Brazil's request for establishment is compounded in an accelerated timetable. However, although Article 4.2 of the SCM Agreement requires the Member requesting consultations to provide a "statement of available evidence", there is nothing in either the DSU or the SCM Agreement to suggest that requests for establishment of panels for "fast-track" cases should be any more precise than requests for establishment of panels in "standard" WTO dispute settlement cases.

9.30 Second, in European Communities - Computer Equipment the Appellate Body was required to consider the specificity of the US panel request, which referred inter alia to "all types of LAN [Local Area Network] equipment". In doing so, the Appellate Body stated that:

In EC - Bananas, we stated that:

9.31 We consider it appropriate to apply a similar standard in determining whether Brazil's request for establishment meets the requirements of Article 6.2 of the DSU in the present case. In particular, we shall consider whether any alleged imprecision in Brazil's request for establishment affected Canada's due process rights of defence in the course of the Panel proceedings. Indeed, we understand Canada to advocate a similar interpretation of Article 6.2, since Canada asserts that Brazil's "lack of precision prejudices Canada's due process right to know the case against it. These claims are therefore inconsistent with Article 6.2 of the DSU."⁵¹¹ (emphasis supplied). Thus, we understand Canada to argue that Brazil's request for establishment would not be inconsistent with Article 6.2 of the DSU if the alleged lack of precision did not prejudice Canada's due process right to know the case against it.

9.32 We note Canada's argument that a party's request for establishment of a panel should be more specific than its request for consultations. As a general rule, it may be true that a request for establishment will be more specific than a request for consultations. However, we consider that Article 6.2 of the DSU is concerned exclusively with a party's request for establishment. Thus, the consistency of a party's request for establishment with Article 6.2 of the DSU should be judged exclusively in light of the specificity of the request for establishment, and not in light of the specificity of the party's earlier request for consultations.

9.33 Finally, we recall that Canada asked the Panel to rule on the consistency of Brazil's request for establishment with Article 6.2 of the DSU prior to the deadline for the parties' first written submissions. We recall our finding that there is no requirement in the DSU for panels to rule on preliminary issues prior to the parties' first written submissions. Nor is there any established practice to this effect, for there are numerous panel reports where rulings on preliminary issues have been reserved until the final report.⁵¹² Furthermore, we have stated above that we will decide this preliminary issue by determining whether any alleged imprecision in Brazil's request for establishment prejudiced Canada's due process right of defence during the panel process. We can necessarily only undertake such an analysis at the end of the panel process. For these reasons, we rejected Canada's request for a preliminary ruling on this issue prior to the deadline for the parties' first submissions.

EDC "financing"

9.34 According to Brazil, the term "financing" does not imply a distinct form of 'direct lending', but is a broader, more general term encompassing direct lending, debt and equity support".⁵¹³ By its own admission, therefore, Brazil could have chosen a more specific term in its request for establishment. However, this does not necessarily mean that Brazil's use of the term "financing" prejudiced Canada's due process right of defence during the Panel process.

9.35 In addition to EDC "financing", Brazil's request for establishment refers to EDC "loan guarantees" and "equity infusions". Given the express references to "loan guarantees" and "equity infusions", and given that EDC is primarily a lending institution,⁵¹⁴ we consider that there is very little else left under the term "financing" besides direct lending. For this reason alone, we believe that Canada would have been on notice that Brazil intended to advance claims concerning direct lending by the EDC under the concept of "financing". We attach further importance to the fact that, in its preliminary submission concerning the jurisdiction of the Panel, Canada itself interpreted Brazil's reference to "financing" as a reference to "direct lending".⁵¹⁵ For these reasons we consider that, insofar as Brazil advances claims concerning EDC direct lending in the course of Panel proceedings, Canada's due process right of defence is not impaired by any lack of precision in the term "financing". We therefore find that the term "financing" is sufficiently clear and specific for the purpose of Article 6.2 of the DSU, insofar as claims concerning EDC direct lending are concerned.

Funds provided to the "civil aircraft industry" by Technology Partnerships Canada and "predecessor programs"

Civil aircraft industry

9.36 We do not consider that the mere fact that the scope of a measure is identified in the request for establishment by reference to a broad product or industry grouping necessarily renders that request for establishment inconsistent with Article 6.2 of the DSU. We believe that the Appellate Body was of a similar opinion in LAN Equipment, where it shared the US concern that:

9.37 Although the Appellate Body's remarks were made in the context of a reference to a broad product grouping in the complaining party's request for establishment, we can see no basis for not adopting a similar approach when the request for establishment refers to a broad industry sector, such as the "civil aircraft industry". If a complaining party believes that a measure affects a broad industry sector, in our view that complaining party should be entitled to challenge that measure insofar as it affects the totality of the industry concerned, without having to spell out the individual components of that industry, and without running afoul of Article 6.2 of the DSU.

9.38 Furthermore, despite the breadth of the industry sector selected by Brazil, Canada was nevertheless able to define and establish the outer-limits of that industry. Canada stated specifically that "[i]t includes firms ranging from machine shops and metal treatment facilities to those involved in advanced instrumentation and communications equipment. In Canada, this comprises over 200 enterprises employing over 38,000 workers."⁵¹⁶ Given Canada's ability to define the outer-limits of the "civil aircraft industry", we fail to see how Canada's due process right of defence could be prejudiced by an alleged lack of precision in the terms employed by Brazil.

9.39 For these reasons, we find that the phrase "civil aircraft industry" is sufficiently specific for the purpose of Article 6.2 of the DSU.

Predecessor programmes

9.40 Despite the reference to "predecessor programs" in the plural, Brazil has argued that, in fact, there is only one predecessor program, i.e., the DIPP. Given the existence of only one predecessor programme, the reference to "predecessor programs" in the plural could have caused some uncertainty to Canada. However, Brazil has demonstrated⁵¹⁷ that the TPC programme was perceived by Industry Canada to constitute the "new" programme replacing the DIPP. Thus, despite any potential for uncertainty concerning the exact parameters of Brazil's claim against "predecessor programs", Canada should have known that Brazil's "predecessor programs" claim would at least include DIPP. For this reason, we do not consider that the term "predecessor programs" would have prejudiced Canada's due process rights during the Panel process insofar as claims regarding the DIPP are concerned. In these circumstances, we find that the reference to "predecessor programs" is "readily understandable"⁵¹⁸ and sufficiently specific for the purpose of Article 6.2 of the DSU insofar as claims concerning DIPP are concerned.

"Benefits" provided under the Canada-Québec Subsidiary Agreement on Industrial Development and the Société de Développement Industriel du Québec

9.41 Article 1.1(b) of the SCM Agreement explicitly provides that, in order to constitute a "subsidy", a "financial contribution" by a government or public body must confer a "benefit". In the context of a dispute under the SCM Agreement, therefore, the term "benefits" should be "readily understandable"⁵¹⁹ to an informed reader. Canada asserts that the reference to "benefits" does not make it clear which aspect of the relevant programmes, or which activities or transactions under these programmes, are considered by Brazil to confer a "benefit". However, and especially in the context of claims against the application of alleged subsidy programmes that could involve tens or even hundreds of transactions, we consider that such detailed information would normally be included in the arguments adduced by the complaining party in its various submissions to a panel. The mere fact that such detailed information is not included in the request for establishment does not in and of itself prejudice the respondent's due process right of defence. For these reasons, we find that the term "benefits" is sufficiently specific for the purpose of Article 6.2 of the DSU.

2. Temporal application of the SCM Agreement

9.42 Canada has raised a preliminary issue concerning Brazil's claim against an alleged export subsidy granted in April 1989. Canada requested a preliminary ruling that the SCM Agreement does not apply to contributions and transactions that took place prior to 1 January 1995, the date of entry into force of the WTO Agreement. Canada's request is based on Article 28 of the Vienna Convention on the Law of Treaties, which provides:

9.43 Brazil agreed with Canada that, with regard to prohibited subsidies, the SCM Agreement does not apply to contributions made prior to 1 January 1995. For this reason, Brazil withdrew its claim concerning the 1989 measure in issue.

9.44 In light of Brazil's decision to withdraw its claim concerning the 1989 measure in issue, we do not consider it necessary to rule on the preliminary issue raised by Canada.

3. Fact-finding by the Panel

(a) Arguments of the parties

9.45 In a letter to the Panel dated 23 October 1998, Brazil stated that it would be "handicapped" in pursuing its case "because Canada declined to provide transaction-specific details concerning [certain] measures during consultations." Brazil referred to the following statement by the Appellate Body in India Pharmaceuticals to argue that Canada was not justified in declining to disclose relevant details during consultations:

9.46 Brazil argued that Canada's refusal to disclose the details of the operations of certain measures with regard to regional civil aircraft meant that "not all of the pertinent facts relating to its claim [were] before the Panel." Brazil then referred to the following statement by the Appellate Body in India Pharmaceuticals:

9.47 For these reasons, Brazil requested the Panel "to engage in additional fact-finding by requesting Canada to present to the panel and the parties, at the first meeting of the Panel, the complete details of all operations of the Export Development Corporation, the Canada Account, the Technology Partnerships Canada and its predecessor programs, the Canada-Québec Subsidiary Agreement on Industrial development, and the Société de Développement Industriel du Québec with regard to the civil aircraft industry, including all grants, loans, equity infusions, and loan guarantees, or any other direct or indirect financial contribution of any kind."

9.48 Canada submits that it is a well-established practice for a WTO panel, having received the first submissions and evidence of the parties, and having heard their first substantive oral arguments, to ask the parties for information additional to that submitted by the parties. According to Canada, there is no support from the Appellate Body, however, or from the DSU, WTO practice, or international law and practice for turning the panel process into something akin to a commission of inquiry. Canada submits that there is also no provision in the DSU and no precedent in GATT or WTO jurisprudence for subjecting a responding party to a discovery process.

(b) Evaluation by the Panel

9.49 We note that, by virtue of Article 13.1 of the DSU, we "have the right to seek information ... from any ... body which [we] deem[] appropriate." We note further that, according to the Appellate Body in Argentina - Textiles and Apparel, Article 13 of the DSU constitutes "a grant of discretionary authority: a panel is not duty-bound to seek information in each and every case..." ⁵²⁰ We also recall the Appellate Body's statement in European Communities - Hormones that "Article 13 of the DSU enables a panel to seek information ... as it deems appropriate in a particular case..."⁵²¹

9.50 We did not consider it appropriate to seek any information before receiving at least the first written submissions of both parties. We considered that it was only on the basis of these first written submissions that we could properly determine what, if any, additional information might need to be sought. In this regard, we recall that the Appellate Body in India - Patents referred to "additional fact-finding" by a panel in a context where pertinent facts are "not before the panel".⁵²² In our view, the Appellate Body could not have been referring in that case to a situation where information is not before the panel because the panel has not yet received any submissions from the parties. Any contrary view would be absurd, since it would at once defeat the very purpose of the parties making written submissions.

9.51 Brazil and Canada filed their first written submissions on 3 and 16 November 1998 respectively. Brazil renewed its 23 October 1998 request at the first meeting with the Panel on 26 November 1998. The Panel sent the parties written questions on 27 November 1998, in order to seek clarification of a number of issues raised in the first written submissions and at the first substantive meeting with the Panel. These questions were not intended to elicit the detailed information referred to in Brazil's request of 23 October 1998.

9.52 Following receipt of the parties' second written and oral submissions, and the parties' written replies to the Panel's questions of 27 November 1998, a number of relevant transactions had been identified in the record. Accordingly, on 10 and 13 December 1998 we exercised our discretionary authority under Article 13.1 and asked Canada to provide detailed information (including the terms and conditions of various loans and contributions etc., and internal assessment documents concerning such loans and contributions etc.) concerning some of those transactions.⁵²³ However, we did not consider it appropriate to seek detailed information in respect of transactions (if any) not identified in the record.

9.53 In the circumstances of the present case, we did not consider it appropriate to exercise our discretionary authority under ticle 13.1 to make generalized requests for information. Instead, we only sought detailed information of relevant loans, funds, contributions, assistance etc. identified in the record. Whereas more generalized requests for information (of the sort envisaged in Brazil's submission of 23 October 1998) may be appropriate for bodies such as commissions of enquiry, we do not consider them appropriate for a panel acting under Article 13.1 of the DSU. In cases involving alleged prohibited export subsidies, we appreciate that a complaining party may have difficulty in obtaining information necessary to support its case, especially where details of the alleged subsidy has not been notified under Article 25 of the SCM Agreement, and where the respondent Member chooses not to divulge relevant information during dispute settlement proceedings. This raises obvious systemic issues regarding the effectiveness of the SCM Agreement notification procedures, and of the WTO dispute settlement procedures generally. However, we consider that such systemic issues are a matter for serious consideration by the WTO Members in the appropriate fora, and not a matter to be resolved by this Panel acting under Article 13.1 of the DSU.

To continue with Procedures governing Business Confidential Information

⁵⁰⁹ See, for example, paragraphs 40, 43 and 45 of Canada's preliminary submission regarding the jurisdiction of the Panel, dated 23 October 1998.

⁵¹⁰ European Communities - Customs Classification of Certain Computer Equipment, WT/DS62, 67, 68/AB/R, adopted 22 June 1998, paras. 68, 69 and 70.

⁵¹¹ Canada's preliminary submission regarding the jurisdiction of the Panel, dated 23 October 1998, para. 37.

⁵¹² See, for example, European Communities - Bananas (WT/DS27//R, adopted 25 September 1997), and European Communities - Computer Equipment (WT/DS62, 67/R, adopted 22 June 1998).

⁵¹³ Brazil's reply to Canada's preliminary submission, dated 30 October 1998, page 4.

⁵¹⁴ According to EDC's 1997 Annual Report (page 27), loan interest was by far EDC's greatest source of income during 1997. EDC's corporate plan provides for this trend to continue through 1998.

⁵¹⁵ Canada's preliminary submission regarding the jurisdiction of the Panel, dated 23 October 1998, para. 33.

⁵¹⁶ See para. 4.47 above.

⁵¹⁷ Brazil's reply to Canada's preliminary submission, dated 30 October 1998, para. 4.16.

⁵¹⁸ European Communities - Customs Classification of Certain Computer Equipment, WT/DS62, 67, 68/AB/R, adopted 22 June 1998, para. 70.

⁵¹⁹ European Communities - Customs Classification of Certain Computer Equipment, WT/DS62, 67, 68/AB/R, adopted 22 June 1998, para. 70.

⁵²⁰ Argentina - Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items, WT/DS56/AB/R, adopted 22 April 1998, para. 84.

⁵²¹ EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26,48, AB/R, adopted 13 February 1998, para. 147.

⁵²² India - Patent Protection for Pharmnaceutical And Agricultural Chemical Products, WT/DS50/AB/R, adopted 16 January 1998 para. 94.

⁵²³ Our questions also addressed more general issues relevant to the case.