Desktop version

Home arrow Law arrow Implementing the Cape Town Convention and the Domestic Laws on Secured Transactions

Source

Practical Issues

The first question is how to define and then identify railway rolling stock.

The definition of railway rolling stock is wide, encompassing not just conventional railway equipment but also, because the Protocol applies to all vehicles running on rails or above, on or under permanent guideways, such diverse equipment categories as monorail carriages, trams, mountain railway carriages, cable cars and even cranes and gantries at ports.[1] But what constitutes an item of railway rolling stock? This can be an interesting issue in the context of articulated vehicles. The regulations being prepared for the International Registry and guidance notes will follow industry practice where ever possible but essentially, if a carriage is not permanently connected to another carriage or locomotive, it will be considered to be an item of railway rolling stock in its own right.

Once it is established what constitutes an item of railway rolling stock, the next problem is how to identify it. Since the objective of the Cape Town Convention is to facilitate true asset backed financing, it is essential that a creditor is able to identify precisely and unequivocally the equipment in which any security interest.[2] has been created.[3] But there is no uniform system globally for identifying railway rolling stock in a unique and commonly accepted way. This has had some significant practical implications. Initially it was thought that, like in the aviation sector, a manufacturer’s identifier would be sufficient. This still remains as a possibility[4] but it was quickly apparent that, especially in the light of the broad spread of assets covered by the Protocol, not only did not all manufacturers have identification systems but they were potentially incompatible with each other and in certain cases identifiers could be duplicated or recycled, so were not unique as an identifier as required by Article XIV. Similarly immatriculation or running numbers can change so could not be used since the identifier has to be unique and permanent. There has been no alternative therefore other than to invent a new global unique numbering system where an URVIS[5] number will be allocated directly by the international registry as a unique and permanent identifier for one specific item of equipment.

This all represent a complete break with the identification system in the Aircraft Protocol but it has also raised important questions as to how the number is to be created, how it can be allocated as well as how it can be shown on the rolling stock concerned. So it is no longer a question, in the Rail Protocol “eco-system”, of a creditor simply taking existing manufacturer identifiers and registering the international interest against that asset, but in the rail sector the creditor will first have to ensure that the rolling stock is carrying an URVIS number prior to effecting the registration. On the positive side, the creation of a new universal identification system will open up new opportunities for the rail sector, including lifetime records for assets and the potential to track the location of individual assets in real time worldwide. Moreover with millions of potential items of railway rolling stock to be registered at the International Registry, it will be a clear requirement from the outset that there is a system of registration of and search against specific groups of assets.

Lastly unlike the aviation sector, generally there are no national registries registering either title or security interests in relation to railway rolling stock. The absence of existing national registries has meant that there is no existing domestic legislation which can be adapted through the operation of the Rail Protocol and there is no publicly searchable system for identifying either ownership or secured party status in relation to an item of railway rolling stock. But the advantage is that the international registry then will play a significant role for domestic rail financing transactions, even where it is clear that the financed equipment will not cross jurisdictional boundaries. In addition, the fact of the registration of a notice of sale or security interest of itself (and the ability to search against an asset) will be a major step forward for industry as lawyers and transaction parties will be able to check, conclusively and in advance of closing a transaction, rival claims on assets to be financed, leased or purchased, as well as potentially to create additional rights for creditors in many jurisdictions, as a matter of domestic law, regardless of the terms and applicability of the Rail Protocol.

In conclusion, since the registry regulations will only be published shortly before it comes into force and practical issues will undoubtedly be revisited once it is in force, it is not entirely clear how the Rail Protocol will operate in practice. What is certain is that in most jurisdictions it will not only be providing an upgraded system for recording, prioritising and enforcing security interests but it will actually create those systems. The Protocol raises some legal policy challenges, but most importantly, provides significant new practical solutions for industry specific issues. When in force it will transform the rail industry. While many of the basic parameters of the Cape Town Convention still apply for the rail sector, there are specific industry considerations which have at times necessitated practical digressions. But that was what the drafters of the Cape Town Convention expected from the outset.

Howard Rosen CBE M.A. (Oxon.), Solicitor of the Senior Courts of England and Wales; Principal, Howard Rosen Solicitors, Zug, Switzerland, studied law at Oxford University and qualified as an English solicitor in 1980. He worked as an in house counsel for international leasing companies between 1980 and 1988 and since 1989 has led a boutique law firm, Howard Rosen Solicitors in Zug, Switzerland, specialising in international commercial and finance law, with a particular emphasis on aviation and rail finance. He is a member of the Law Society of England and Wales, the International Bar Association and the Society of Trust and Estate Practitioners. He is a

Correspondent of Unidroit, is Immediate Past President of the Council of British Chambers of Commerce in Europe and remains the chairman of its Public Affairs Committee. Since 1996 Mr Rosen has been chairman of the Rail Working Group (www.railworkinggroup.org), a world-wide not for profit industry association, constituted by UNIDROIT, which is dedicated to the implementation of the Luxembourg Rail Protocol to the Cape Town Convention on International Interests in Mobile Equipment. He is a regular writer, as well as a speaker and moderator at internationalrail conferences.

  • [1] See Art. 1.2(e), Goode, Official Commentary ibid, Comment 4.350 and RWG briefing paperR0556 What Equipment is covered by the Luxembourg Protocol? More than you might think... atwww.railworkinggroup.org.
  • [2] “International Interest” under the Base Convention
  • [3] “‘For the purposes of Article 18(1)(a) of the Convention, the regulations shall prescribe a systemfor the allocation of identification numbers by the Registrar which enable the unique identificationof items of railway rolling stock” - Article XIV. 1
  • [4] Article XIV.1(b)
  • [5] Unique Rail Vehicle Identification System being a non-repeatable 20-digit number (including 1or more check digits) allocated permanently to one specific item of railway rolling stock. See alsoRWG briefing paper R0480 Identifying railway rolling stock it’s time for a world-wide system atwww.railworkinggroup.org.
 
Source
Found a mistake? Please highlight the word and press Shift + Enter  
< Prev   CONTENTS   Next >

Related topics