The World Trade Organization is to establish a panel to rule on the legality of subsidies the European Union has provided to protect its shipbuilding industries.

The EU had earlier blocked South Korea's first request for a panel, but South Korea submitted its demand for the second time this month, leading to the launch of a formal investigation.

WTO regulations stipulate that the dispute settlement board (DSB) must automatically set up a panel if any member nation demands such a request two consecutive times. The board must subsequently investigate the case within six months by forming a dispute settlement panel.

Seoul decided to call for the establishment of the panel after two negotiations with the EU collapsed late last year and the EU decided to extend its subsidies to shipbuilding industries until March 2005.