Successful Risk Management – Problems arising from the lack of rolling stock title security

1. Successful Risk Management – Problems arising from the lack of rolling stock title security Martin J Fleetwood – Partner Secretary, Rail Working Group

2. Overview • Can interest be registered? • Claims by Third Parties • Recovery at the end of the lease period • Insolvency of Operators • Keeping track of rolling stock

3. Can an interest be registered? • Rolling stock is designed to move about • Which country should an asset be registered in? • Can a charge be registered over a moveable asset? • What registers are available for recording an interest in rolling stock? • Operational Asset Register for a particular system • Charges register • A specific county-based asset ownership register • Asset register under the Luxembourg Rail Protocol • Will one country recognise a charge registered in another? • Conflict of laws • How can you identify your item of rolling stock amongst a number of similar vehicles?

4. Claims by Third Parties • Sale to third parties • Bona fide purchaser in good faith • In “home” country • Once vehicle is in another country • Where notice of ownership is apparent e.g. title plate • Third party creditor’s claim for distress • Jurisdiction may give priority of claim • Requirement to apply to court for release of asset • Administrator of insolvent Operator • Jurisdiction may give priority of claim

5. Recovery at end of Lease Period • Location of rolling stock • How easy is it to locate the asset? • Is proof of ownership required to recover if not redelivered by the Operator? • Are fees payable for demurrage • Speed of local courts to assist recovery • What proof of ownership is required by the court? • What if there is a counterclaim by a third party? • What are the likely court/recovery costs • Loss of rental from being unable to re-lease rolling stock

6. Insolvency of the Operator • Proof of ownership as against the administrator/ liquidator • Local insolvency regime • If a fleet is spread over a number of countries will there be a number of separate proceedings to deal with? • Ability to recover rolling stock • Can an Administrator continue to use the asset? • US Chapter 11 proceedings • Payments for continued use of rolling stock • Speed of local courts to deal with claims for return of rolling stock • Loss of rental from being unable to re-lease rolling stock • A number of civil law jurisdictions are more favourable to the debtor

7. Keeping Track of Rolling Stock • Operator’s vehicle identification number • Often relates to the type of vehicle and can change with alterations to the vehicle • Likely to change with a change of Operator • Record are only as good as the people who keep them • Miss-recording the vehicles making up a train • Identifying where vehicles are crossing borders • Entering private sidings • How can you gain access to check that the vehicle is yours? • GPS coverage • Is there coverage for the entire journey? • How secure is the transponder?