Sept 3 (Reuters) - The World Trade Organisation is due to issue a confidential ruling on Friday to the United States and European Union in the case brought by Washington over subsidies for EADS subsidiary Airbus.
But the ruling does not mark the end of the case, launched by the United States in October 2004. The prospect of trade sanctions -- if ever approved -- is still far off and there are many opportunities for appeals and other legal manoeuvres before the dispute is finally settled.
The next major deadline will come in about 6 months, when the WTO issues a similar interim ruling in the counter-suit brought by the EU against the United States over subsidies for Boeing.
At that point, when the legal outcome in both cases is emerging, the two sides may decide to end the litigation and negotiate a settlement.
Otherwise, 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.
In this case the consultations lasted 8 months.
PANEL
The panel is requested at a meeting of the WTO's dispute settlement body (DSB), held once a month.
The respondent 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.
In this case the United States requested a panel in May 2005, the EU rejected it at a DSB meeting in June, and it was finally set up in July 2005.
The panel should be formed within 20 days, with both parties agreeing on all 3 judges sitting on it. If they cannot agree they can ask the WTO director-general to compose the panel, within another 10 days.
The United States asked the director-general to do that in October 2005, and the panel was formed later that month.
THE RULING
WTO panels usually aim to issue a ruling, or report, to the parties within 6 months of being formed. But they can take longer in a complex case.
This report is confidential and is not officially published. However the final report, usually circulated to all WTO members and published on the WTO website 2-3 months later, rarely differs from the confidential interim ruling.
In this case the panel advised the WTO in April 2006 that it could not complete its work within 6 months. The ruling has been delayed repeatedly since then. It is this confidential, interim ruling that was issued to the parties on Friday.
THE APPEAL
Once the final ruling has been 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 that 60 days, either party can appeal.
The appeal -- looking at whether the original panel observed trade law in coming to its decision, rather than re-examining the facts of the case -- 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.
WTO members must accept or reject the appeal ruling within 30 days, at a meeting of the DSB. It can only be rejected by consensus -- that is with no member objecting to the rejection.
COMPLIANCE
If the panel or appellate body have found against the respondent, 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 DSB, the respondent has a "reasonable period of time" to make these changes and conform with the rules.
Both parties may agree the reasonable period of time within 45 days of adoption, or put it to arbitration, which takes up to 90 days. The period is usually 15 months from adoption.
COMPLIANCE DISPUTES
If the respondent believes the plaintiff has failed to comply with the ruling in the reasonable period of time, 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. Now the plaintiff can seek retaliation to compensate it for the losses it has suffered by the respondent's illegal behaviour, 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. (Source: WTO) (Compiled by Jonathan Lynn)