In a statement Monday morning, Brazil’s Embraer S.A. (NYSE: ERJ) said that it had begun arbitration proceedings following the weekend announcement that Boeing Co. (NYSE: BA) had terminated its Master Transaction Agreement (MTA) between the two aircraft makers.

In its press release, Boeing indicated that it had exercised its rights to terminate after Embraer did not satisfy the necessary conditions. The press release also indicated that April 24, 2020, was the initial termination date and that it was subject to extension by either party if certain conditions were met. The planned partnership also was shown to have received unconditional regulatory approval already from the necessary regulatory bodies, except for the European Commission.

The agreement between Boeing and Embraer was struck in July 2018 and would have created a joint venture that was to be made up of Embraer’s commercial aviation business and a second joint venture to develop new markets for the C-390 Millennium medium airlift and air mobility aircraft.

Marc Allen, president of Embraer Partnership & Group Operations, said:

Boeing has worked diligently over more than two years to finalize its transaction with Embraer. Over the past several months, we had productive but ultimately unsuccessful negotiations about unsatisfied MTA conditions. We all aimed to resolve those by the initial termination date, but it didn’t happen. It is deeply disappointing. But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues.

In its initial response to the termination of the deal, Embraer noted:

Embraer believes strongly that Boeing has wrongfully terminated the MTA, that it has manufactured false claims as a pretext to seek to avoid its commitments to close the transaction and pay Embraer the US$4.2 billion purchase price. We believe Boeing has engaged in a systematic pattern of delay and repeated violations of the MTA, because of its unwillingness to complete the transaction in light of its own financial condition and 737 MAX and other business and reputational problems.

During Monday’s annual Boeing shareholders meeting, CEO David Calhoun said it was “pointless” to continue negotiations for the joint venture, although he did not specify which conditions Embraer had failed to meet.

Scott Hamilton at Leeham News and Analysis said there has been speculation that if Boeing were to receive federal funds to help the company get through the economic downturn caused by the coronavirus pandemic, the company may be prohibited from making any foreign investments.

Calhoun also said Boeing won’t be paying dividends for at least three to five years, as it works to restore its balance sheet.

Embraer stock traded down nearly 12%, at $5.13 in a 52-week range of $4.91 to $20.92, on Monday. The low was posted earlier in the morning.

Boeing stock traded down about 0.6% in the noon hour, at $128.19 in a 52-week range of $89.00 to $391.00.

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