The Rail Protocol in the run-up to the Diplomatic Conference

1. The Rail Protocol in the run-up to the Diplomatic Conference Internationale Konferenz zur Verkehrsmittel- und Verkehrsinfrastrukturfinanzierung Universität Mannheim, 9. November 2006 Howard Rosen, Zug, Switzerland, Chairman Rail Working Group

2. Members of the Rail Working Group AAE Ahaus Alstatter Eisenbahn  The Alta Group Angel Trains  Ansaldo Trasporti  Ashurst  Association of American Railroads  Aviation Advocacy Bombardier Transportation Bruckhaus Westrick Heller Löber  Community of European Railways  Costaferroviaria  debis Financial Engineering GmbH  English Welsh and Scottish Railway Ermewa International  European Investment Bank  Ferroviaria  Firema  Freehill Hollingdale & Page  Freshfields  GE Capital  Global Capital Finance Howard Rosen Solicitor  HSBC Rail  HSH Nordbank KfW Kreditanstalt for Wiederaufbau  Lenz & Staehelin  McCarthy Tétrault  SNCB SG  Nauta Dutilh  NIB Capital Bank N.V.  Norton Rose  Intergovernmental Organisation for International Carriage by Rail (OTIF)  Stephenson Harwood Theodore Goddard  Transnet  Trinity Industries  UIC International Union of Railways  Union of European Railway Industries (UNIFE)  Deutsche VerkehrsBank  White & Case Wiersholm Mellbye & Bech

3. Introduction What we will not cover today: • The reasons for the Convention • The economic case and why it’s important for railways worldwide • What the Convention’s key objectives are • The Draft Rail Protocol and climate change

4. Introduction What we will cover: • A little history and current position of the Rail Protocol • What needs to be done before 12th February • The key issues we have to address and possible answers

5. The Rail ProtocolHistory to the Present

6. Cape Town October/November 2001 295 participants from 58 States and 11 international organizations attended the Diplomatic Conference

7. Cape Town16th November 2001 • Unidroit Convention On International Interests In Mobile Equipment, containing 62 Articles signed • together with Aviation Protocol (a further 37 articles • Convention and Protocol in force since 1st March 2006

8. What the Treaty seeks to achieve • An answer to the Basic Problem - How to finance with security an asset potentially continuously moving across borders? • Limited security in asset financed due to • Local (conflict of) Property Law • Local Bankruptcy Law • Potential conflict of priorities

9. Application ofthe Treaty • The Treaty provides a new protected type of security in relation to • Lessor’s (and lessee’s interest) under a lease • Vendor retaining title in equipment • Lender taking security in an asset financed under a loan

10. The Rail Protocol • Mandated at Cape Town in the Final Act • Three Government Experts’ meetings (last in 2003) • Will be considered (and hopefully adopted) at Diplomatic Conference in Luxembourg commencing 12th February 2007 • Draft protocol carries many – but not all - of the concepts of the aviation protocol

11. Why the Differences? • Very limited existing title registration worldwide • No worldwide international organisation (nearest OTIF) • No nationality for rolling stock • Many more manufacturers • Lower unit cost, greater volume • Limited operating leases

12. Why the Differences? • Less uniformity in practice on identification • Certain types of rolling stock constantly cross borders – contiguous implementation a greater issue • State Railways’ club (UIC) and bank (Eurofima) • Later in the private sector funding cycle – responding to a (perceived) future need? • National treasures – and state funding

13. Consequential conclusions • All rolling stock is intended to be covered in the Protocol (regardless of use and “mission”) • Regionally consistent adoption important • Some conflict of interest between state and state owned operators • Unified approach from manufacturers vital

14. The Rail ProtocolThe Challenges before February

15. Making people aware • Lectures • Seminars • Website www.railworkinggroup.org • EU/Government discussions • Motivating the industry and the business case – and keeping costs down • Getting the lawyers excited • Identify the key issues

16. Identifying and researching open issues • Identifying assets • Title Transfers • Engines • Insolvency • Public Service Exemption • Registry rules, costs and modalities • Integration with other initiatives • Legacy

17. Summary • Some different problems to aviation sector, requiring different solutions • The Rail Protocol will provide a new concept of security for asset backed financing in rolling stock – not just a new level of security • It will create security not currently available in most jurisdictions

18. Summary • Not all of Industry and Governments fully focused • Issues to confront are difficult ones – genuine hard cases • Registry operational costs are a key factor • The goals are achievable but time is short

19. The Rail Protocol in the run-up to the Diplomatic Conference Internationale Konferenz zur Verkehrsmittel- und Verkehrsinfrastrukturfinanzierung Universität Mannheim, 9. November 200619 Howard Rosen, Zug, Switzerland, Chairman Rail Working Group