AfricaRail 2009 Johannesburg, 23rd June 2009 Exploring the Luxembourg Rail Protocol Howard Rosen Principal, Howard Rosen

1. www.railworkinggroup.org • AfricaRail 2009 • Johannesburg, 23rd June 2009 • Exploring the Luxembourg Rail Protocol • Howard Rosen • Principal, Howard Rosen Solicitors, Zug, Switzerland • Chairman, Rail Working Group

2. Cape Town October/November 2001 participants from 58 States and 11 international organisations at the Diplomatic Conference

3. Luxembourg 2007 participants from 42 States and 12 international organisations at the Diplomatic Conference

4. Introduction www.railworkinggroup.org • What are the Luxembourg Protocol’s goals? • What does it apply to? • Who benefits and why? • How does it achieve the goals – the legal analysis? • How will it work in practice? Howard Rosen Solicitors

5. www.railworkinggroup.org The Goals of the Luxembourg Protocol • More extensive private sector finance for rolling stock at a lower cost • Reduce barriers to entry to the rail sector • Facilitate cross border issues • Create more diverse financing systems in order to facilitate a more competitive and dynamic industry Howard Rosen Solicitors

6. www.railworkinggroup.org • International Leasing today Owner in Country A Conditional Sale Loan Purchaser in Country B Bank in Country D Security Lease Rolling stock operating in countries E, F & G Operator in Country C Howard Rosen Solicitors

7. www.railworkinggroup.org What does it apply to? “….vehicles movable on a fixed railway track or directly on, above or below a guideway, together with traction systems, engines, brakes, axles, bogies, pantographs, accessories and other components, equipment and parts, in each case installed on or incorporated in the vehicles, and together with all data, manuals and records relating thereto.” - Art. I (2) LP Howard Rosen Solicitors

8. www.railworkinggroup.org What does it apply to? • “Normal” rolling stock • Metros, trams and light rail rolling stock • From people movers at airports to mountain railways • Exclusions? Howard Rosen Solicitors

9. www.railworkinggroup.org • Identifying the “International Interests”? Payments Funding Supplier Lessor Banks Security Conditional Sale Payments Lease Lessee Howard Rosen Solicitors

10. www.railworkinggroup.org Who benefits and why? • Banks and Lessors • Operators • Manufacturers • Customers • Governments • Aid Agencies Howard Rosen Solicitors

11. www.railworkinggroup.org “Luxembourg” Benefits • More lenders and lessors ready to finance rolling stock • Cost of capital decreases with risk and availability (including “Basel II” advantage) • Legal costs decrease • Safer to move assets across borders (but also helpful for domestic transactions) • Opens out options for more innovative financing structures Howard Rosen Solicitors

12. www.railworkinggroup.org Achieving the Goals – the basics • Design of the Treaty and Protocol • The role of the Prepcom • The Supervisory authority • Regulations • The Registrar Howard Rosen Solicitors

13. www.railworkinggroup.org Achieving the Goals – the basics • Creates as an “International Interest” security interest held by certain types of creditors • Provides for an international registry accessible through the internet 24/7 at which interests can be registered and searched against • Allocates priorities to registered interests • Adopts detailed enforcement rules for creditors on debtor default or insolvency Howard Rosen Solicitors

14. www.railworkinggroup.org Achieving the Goals – the detail • The Treaty: http://www.railworkinggroup.org/publications_01.html • The Protocol: http://www.railworkinggroup.org/publications_03.html • Articles: http://www.railworkinggroup.org/publications_04.html • How the Registry should work • The à la carte concept – opt-ins and opt outs • Party autonomy • Sales Howard Rosen Solicitors

15. www.railworkinggroup.org Some practical issues • Costs • Accessibility • Designated Entry points • Asset identification: Art V and Art XIV LP Howard Rosen Solicitors

16. www.railworkinggroup.org • AfricaRail 2009 • Johannesburg, 23rd June 2009 • Exploring the Luxembourg Rail Protocol • Howard Rosen • Principal, Howard Rosen Solicitors, Zug, Switzerland • Chairman, Rail Working Group • E-mail: howard.rosen@railworkinggroup.org • www.legalease.ch