Luxembourg: The Luxembourg Protocol: Registration Of Security Interests Against Railway Rolling Stock In New Public International Registry

The Luxembourg Protocol to the Cape Town Convention on International Interests in Mobile Equipment (the "Protocol") will, when in force, set up a new global legal regime that will make it easier and cheaper for the private sector to finance railway rolling stock. When in force, the multilateral treaty will extend the benefits of the Cape Town Convention to the rail industry.

The Protocol aims to increase certainty and reduce risks in asset-based financing for the acquisition and use of railway rolling stock through a global legal framework providing international recognition and enforcement of creditors' rights.¹ The Protocol covers all equipment running above, on, or under a permanent guideway – including freight and passenger railcars and locomotives, light rail, subway cars, airport people movers, trams, trolleys, monorail vehicles and cable cars — and it applies when the debtor is located in a contracting state, regardless of the location of the railway equipment or the creditor.

Currently, the Protocol has been ratified by Luxembourg, Gabon, Spain and Sweden, with an expectation to enter into force by late 2023.² However, the Intergovernmental Organization for International Carriage by Rail must deposit a certificate with the International Institute for the Unification of Private Law.

Once the Protocol enters into force, security interests against rolling stock can be registered in a new publicly-searchable international registry to be located in Luxembourg. The registry will be similar to the International Registry in Dublin already established with respect to aircraft. As required by the Protocol, the Inland Transport Committee of the United Nations Economic Commission for Europe has adopted new rules on the permanent identification of railway rolling stock. The unique rail vehicle identification system creates a new standard and responsibilities for permanently marking railway rolling stock with a unique identifier.

The Protocol will reduce risk for rail equipment financiers, by providing creditors with basic default rights and remedies on default or insolvency, including the ability to seek expedited interim relief in insolvency proceedings. This may help attract more private sector lenders to the market, leading to lower financing costs for non-state guaranteed operators, encouraging capital investment and promoting economic growth. The implications of the Protocol are not only limited to economic growth, but also sustainability efforts and environmental protection strategies, as rail is widely accepted as a method of sustainable transport.³

Footnotes

1. Prep. Comm. Rail/9/INF 1, 9th session, Berne/remote, 8 April 2021. https://otif.org/fileadmin/new/2-Activities/2F-LuxembourgProtocol/2Fb_PrepComm/Doc%20INF%201-Overview%20of%20the%20Protocol.pdf.

2. States Parties – Luxembourg Protocol To The Convention On International Interests In Mobile Equipment On Matters Specific To Railway Rolling Stock (Luxembourg, 2007) https://www.unidroit.org/instruments/security-interests/rail-protocol/status/.

3. Other Sources: International Institute for the Unification of Private Law, Luxembourg Rail Protocol, no date https://otif.org/en/?page_id=116.

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