AfricaRail 2009 Johannesburg, 23rd June 2009 Exploring the Luxembourg Rail Protocol Howard Rosen Principal, Howard Rosen Solicitors, Zug, Switzerland Chairman, Rail Working Group

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

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

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

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

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

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

What does it apply to? “Normal” rolling stock“Normal” rolling stock Metros, trams and light rail rolling stockMetros, trams and light rail rolling stock From people movers at airports to mountain railwaysFrom people movers at airports to mountain railways Exclusions?Exclusions? Howard Rosen Solicitors

Conditional Sale Funding Lease Lessee Payments Security Banks Supplier Lessor Identifying the “International Interests”? Howard Rosen Solicitors Payments

Who benefits and why? Banks and LessorsBanks and Lessors OperatorsOperators ManufacturersManufacturers CustomersCustomers GovernmentsGovernments Aid AgenciesAid Agencies Howard Rosen Solicitors

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

Achieving the Goals – the basics Design of the Treaty and ProtocolDesign of the Treaty and Protocol The role of the PrepcomThe role of the Prepcom The Supervisory authorityThe Supervisory authority RegulationsRegulations The RegistrarThe Registrar Howard Rosen Solicitors

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

Achieving the Goals – the detail The Treaty: The Protocol: Articles: How the Registry should workHow the Registry should work The à la carte concept – opt-ins and opt outsThe à la carte concept – opt-ins and opt outs Party autonomyParty autonomy SalesSales Howard Rosen Solicitors

Some practical issues CostsCosts AccessibilityAccessibility Designated Entry pointsDesignated Entry points Asset identification: Art V and Art XIV LPAsset identification: Art V and Art XIV LP Howard Rosen Solicitors

AfricaRail 2009 Johannesburg, 23rd June 2009 Exploring the Luxembourg Rail Protocol Howard Rosen Principal, Howard Rosen Solicitors, Zug, Switzerland Chairman, Rail Working Group