INTRODUCTION

Complaint of the European Communities

On 21 October 2002, the European Communities requested consultations with Korea pursuant to Article 4 of the Dispute Settlement Understanding (“the DSU”), Article XXIII:1 of the General Agreement on Tariffs and Trade 1994 (“GATT 1994”), and Articles 4, 7 and 30 of the Agreement on Subsidies and Countervailing Measures (“the SCM Agreement”), with regard to measures affecting trade in commercial vessels.

The European Communities and Korea held the requested consultations on 22 November and 13 December 2002, and 7 May 2003, but failed to reach a mutually satisfactory resolution of the matter.

On 11 June 2003, the European Communities requested the establishment of a panel to examine the matter.

On 10 July 2003, the European Communities requested that the above request be placed on the agenda of the meeting of the Dispute Settlement Body (“the DSB”) scheduled for 21 July 2003. The European Communities further requested that, at the same meeting, the DSB initiate the procedures provided for in Annex V of the SCM Agreement pursuant to paragraph 2 of that Annex.

Establishment and composition of the Panel

At its meeting of 21 July 2003, the DSB established a panel in accordance with Article 6 of the DSU and pursuant to the request made by the European Communities in document WT/DS273/2.

At that meeting, the parties to the dispute also agreed that the Panel should have standard terms of reference. The terms of reference are, therefore, the following:

On 11 August 2003, the European Communities requested the Director- General to determine the composition of the Panel, pursuant to paragraph 7 of Article 8 of the DSU.