Factbox: WTO legal process for Boeing dispute

(Reuters) – Planemaker Boeing received at least $5.3 billion in subsidies from the U.S. government, the World Trade Organization said on Thursday.

But the ruling by no means marks the end of the case, originally launched against Boeing by the European Union in 2004.

The situation is complicated by a parallel dispute brought by the United States against Boeing’s European rival Airbus, on which a WTO panel of experts has already ruled that Airbus must pay back $4 billion in subsidies.

And the prospect of trade sanctions, if ever approved, is still far off for both Airbus and Boeing, and there are many opportunities for appeals and other legal moves before the dispute is settled.

Barring a negotiated settlement, this is how the WTO legal system works:

CONSULTATIONS

A country launches a trade dispute by seeking formal consultations with another country over the issue. These last 60 days, longer if the two parties wish, after which the plaintiff can request the creation of a panel of judges — legal and trade experts — to rule on the dispute. There were consultations on both Boeing and Airbus subsidies back in October 2004, but this particular complaint against Boeing dates from 2005.

PANEL

The panel is requested at a meeting of the WTO’s dispute settlement body (DSB), held once a month. The defendant can reject the first request, but it goes through automatically on the second request unless all WTO members including the plaintiff agree to block it.

The parties must agree to the three judges on the panel. If not they can ask the WTO director-general to select them. A panel for this case was established in 2006.

THE RULING

WTO panels aim to issue a confidential interim report to the parties within 3-5 months of appointment. A final confidential report is issued to the parties up to 6 months after that. There is rarely any substantive difference between the two. Once the final report has been translated several weeks later, it is circulated to all members and published. The WTO aims to publish a report 6-9 months after a panel is formed, but in complex cases this can take much longer.

In this case the ruling has been delayed repeatedly. The confidential interim ruling was issued to the parties in January of this year. Thursday’s public release of the final version comes more than six years after consultations began.

THE APPEAL

Once the final ruling has been fully published, it will be adopted by the WTO within 60 days, at the next meeting of the DSB. If necessary, the plaintiff will call a special meeting of the DSB to adopt the report.

However, within those 60 days, either party can appeal. For cases involving subsidies, as in this one, the deadline for appeal is 30 days. Both parties said on Thursday that they would appeal the Boeing case. Both parties have also appealed the Airbus case on which a different panel ruled in June.

The appeal looks at whether the original panel observed trade law in coming to its decision, rather than re-examining the facts of the case. It is heard by three members drawn from the WTO’s seven-member Appellate Body of trade law experts.

They must deliver their ruling — upholding or overturning all or part of the original panel’s findings — within 90 days.

COMPLIANCE

If the panel or appellate body has found against the defendant, they generally recommend that it should bring its trade practice in line with WTO rules.

Once the WTO has adopted the original panel or appeal ruling at the WTO’s Dispute Settlement Body, the respondent has a “reasonable period of time” to make these changes and conform with the rules, which may be agreed by arbitration.

COMPLIANCE DISPUTES

If the plaintiff believes the defendant has failed to comply with the ruling in the reasonable period of time or by the deadline, it can launch another dispute to determine compliance.

This involves the same process of consultations, panel and appeal. But it works to a tighter time-frame, with the panel usually delivering a ruling within 90 days.

SANCTIONS

An appeal to a compliance dispute is the end of the line. If the defendant loses the appeal the plaintiff can seek retaliation to compensate it for the losses it has suffered by the respondent’s illegal behavior, until the respondent implements the ruling.

This could involve a retaliatory increase in tariffs in the product concerned or similar goods, or “cross-retaliation” in another area, for instance lifting copyright or protection of intellectual property rights for goods like software of music.

The two sides may agree on compensation, or they may go to arbitration over the size and scope of retaliation. The arbitrator should deliver a decision within 60 days.

(Compiled by Jonathan Lynn and Andrew Callus)

Factbox: WTO legal process for Boeing dispute