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June 30, 2010 3:36 PM

Round 1 of Boeing-Airbus Blood Bath Goes to Boeing, Wilmer

Posted by Zach Lowe

It's hard to imagine two companies openly disliking each other as much as Airbus and Boeing, and the centerpiece of their rivalry for dominance in the U.S. and Europe is a set of dueling cases at the World Trade Organization. The first of those cases was formally decided today, and it was a major victory for the United States, Boeing, and Boeing's longtime counsel at Wilmer Cutler Pickering Hale and Dorr, according to The Wall Street Journal

The skinny: The WTO, responding to a complaint the U.S. government brought in 2004 on behalf of Boeing, ruled that about $20 billion in government loans to Airbus and its parent company amounted to illegal export subsidies that gave Airbus an unfair advantage. Some of the loan agreements in question contained clauses that said Airbus would not have to pay the loans back in full even if a project failed, the WSJ says. The loans also were granted at below-market rates, the WTO found.

Sidley Austin has advised Airbus in the WTO dispute. Lawyers at Sidley did not immediately respond to requests for comment. The WTO is expected to rule next month on a separate complaint in which the EU charges Boeing received illegal export subsidies from the U.S. in the form of research grants and other funding, according to lawyers working on the matter and the WSJ.

Boeing and Robert Novick, the lead Wilmer partner on the case, cast the WTO's decision today as a huge victory for the company and the U.S. Novick, who has represented Boeing for several years, said that the victory is so sweeping that an unfavorable ruling in the second WTO case would not balance out the impact of today's decision. Boeing said Airbus should return government loans or at least restructure them in the wake of the ruling, steps Airbus has denied (rather adamantly) it has to take, according to the WSJ. 

Boeing is hoping that the WTO's ruling will give it an advantage over Airbus in their competition for a U.S. government contract to produce flying refueling tankers, the WSJ reports. The contract could be worth up to $40 billion and help the winning company stave off a potential challenge from China's state-owned airplane manufacturer, the WSJ and Bloomberg report.

Novick did not argue the case in front of the WTO; lawyers from the office of the U.S. Trade Representative led the case, Novick says. The Wilmer team worked with the USTR in accumulating evidence from the public record and going through the WTO's version of discovery, a process Novick says does not match discovery as most U.S. litigators understand it. Lawyers in front of the WTO lack subpoena power, and there is no process for taking depositions. Instead, lawyers can file requests for evidence from the other side through the WTO, Novick says. The WTO--should it go forward with a request--can draw an adverse inference if a party does not turn over the requested evidence, but it cannot force the party to fork it over, Novick says. "A U.S.-style litigator would laugh if I referred to the process as discovery," Novick says.

The ruling in the EU's case against the U.S. and Boeing is expected to come on July 16, the WSJ says.

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