INTRODUCTION

REQUEST FOR ARBITRATION AND SELECTION OF THE ARBITRATORS

On 10 May 2000, Canada, pursuant to Article 4.10 of the Agreement on Subsidies and Countervailing Measures (hereinafter the “SCM Agreement”) and Article 22.2 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (hereinafter the “DSU”), requested that a special meeting of the Dispute Settlement Body (“DSB”) be convened to authorize Canada to take appropriate countermeasures in the amount of Canadian dollars (hereinafter “C$”) 700 million per year (WT/DS46/16). At the DSB meeting held on 22 May 2000, Brazil requested, pursuant to Article 22.6 of the DSU, that the matter be referred to arbitration.

In response to Brazil's request, the DSB decided on 22 May 2000 to submit the matter to arbitration of the original panel in accordance with Article 22.6 of the DSU and Article 4.11 of the SCM Agreement. The arbitrators were to determine whether the countermeasures requested by Canada in document WT/DS46/16 were appropriate; it being understood that no countermeasures would be sought pending the Appellate Body report and until after the arbitrators’ report in the present case.

The arbitration was carried out by the original panel (referred to hereinafter as the “Arbitrators”), namely:

PRESENTATION OF THIS REPORT

This report is structured as follows: we first address a number of issues which were discussed in the course of these proceedings and which we considered should be properly reported for the information of the Members and the transparency of the proceedings. These issues are the specific timetable applied by the Arbitrators in this case and the request for third party rights submitted by Australia. Included also is a section on the burden of proof in which we describe how we intend to consider the various data supplied by the parties, having regard to the fact that this case deals with the exportations of one single company, the Brazilian aircraft manufacturer Empresa Brasileira de Aeronáutica S.A. (hereinafter “Embraer”).

Secondly, we proceed to the determination of the “appropriate countermeasures” in the present case, within the meaning of Article 4.10 and 11 of the SCM Agreement. In that context, we first determine the scope of our task.