On November 28, 2016, a World Trade Organization Panel (“Panel”) issued its report in a dispute concerning seven tax-related incentives for civil aircraft provided by the state of Washington in the United States. The European Union claimed that the availability of the incentives was conditional on “the initial siting of a ‘significant commercial airplane manufacturing program’ in the state of Washington” and said that they constituted a prohibited subsidy in the sense of the Agreement on Subsidies and Countervailing Measures (“SCM Agreement”) on the ground that the incentives were contingent on the use of domestic over imported goods. The Panel found in favor of the European Union as it held that the favorable tax rate for the manufacturing or sale of commercial airplanes is a prohibited subsidy within the meaning of the SCM Agreement. This Legal Update discusses the Panel’s decision, which is one in a long series of disputes between the United States and the European Union on the granting of subsidies to their respective large civil aircraft manufacturers—Boeing Co. and Airbus Group SE.
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