The World Trade Organization (WTO) has just stepped into an epic legal clash between the U.S. and the European Union (EU).

Yesterday, the WTO launched an arbitration process to examine a U.S. request for between $7 billion and $10 billion in retaliatory sanctions against the EU for providing purportedly illegal subsidies to European aircraft manufacturer Airbus SAS.

The arbitration process is the latest phase in the drawn-out legal squabble that the U.S. and the EU have been waging on behalf of the aircraft companies Boeing Co. and Airbus, respectively, since 2004. Each side accuses the other of unfairly supporting its own airplane maker.

In June 2010, WTO judges found that the EU had provided Airbus with billions of dollars in illegal subsidies, which adversely affected Boeing, and ordered the group of nations to stop providing illegal aid to the European aviation company.

On Dec. 9, the U.S. claimed the EU was still giving illegal subsidies to Airbus and said it wanted to impose sanctions of up to $10 billion a year on the EU. The U.S. claims the amount represents the value of lost exports of U.S. aircraft, but the EU challenged the sanctions and asked for the matter to be referred to independent arbitration.

The WTO arbitration talks are scheduled for early next year. Arbitrators have 60 days to make a decision on whether to authorize the U.S. sanctions against the EU for allegedly failing to comply with the June 2010 ruling.

Read Businessweek for more about the U.S.-EU legal debacle.