Rail Protocol Enters into Force

The Rail Protocol to the Cape Town Convention on International Interests in Mobile Equipment entered into force on 8 March 2024.

Resolving Conflit Mobile

One of the main goals of the Cape Town Convention was to resolve the perennial problem of change of applicable law governing security interests over tangible moveable assets (conflit mobile).

The application of the lex situs to in rem rights in general and security interests in particular creates a problem when the asset is mobile and moved across borders. A security interest constituted under the law of a first situs may then be enforced in a second situs if the asset was moved between the time of constitution and the time of enforcement. Security interests may be subject to different publicity requirements, however, and a security interest validly constituted under the law of the first situs might then be denied enforcement under the law of the second situs.  The French surpreme court, for instance, has (in)famously held so in a series of judgments rendered in 1933, 1969 and 1974.

The issue gets even more acute where the value of the asset is high and the asset routinely crosses borders. This is the case of planes, for instance.

In order to resolve the issue for similar mobile equipement, the Cape Town Convention has established an international security interests over mobile equipments. The Convention offers the possibility to create an asset which will not be national, but international, and which will thus not create any conflit mobile where the asset is moved from one contracting state to another, as all contracting states recognise the international security interest established under the Convention, and registered in an international registry established for that purpose.

The Cape Town Convention is implemented for particular categories of assets through protocols. The Aircraft Protocol implements the Convention for aircrafts and other aircraft objects (including engines and helicopters). It has been in force since 2006, and currently has 86 Contracting States.

Trains

The second protocol is concerned with trains and other “railway rolling stock”. It similarly aims at establishing an international security interest which creditors could take over trains. The international registry where such international interests should be registered is located in Luxembourg, which explains that the protocol is also known as the Luxembourg Protocol.

A international interest granted under the Protocol will be recognised in all the contracting states.

Contracting States

There are, at the present time, four contracting parties to the Rail Protocol: Gabon, Luxembourg, Spain and Sweden. The European Union (except Denmark) is also a party. Yet, it is unclear whether the Protocol has entered into force only in the four contracting states, or also in the entire EU. The website of UNIDROIT explains that the protocol is in force in the EU, but other reports only mention the four states. Needless to say, there are not so many trains circulating from Sweden to Spain, and even less from Luxembourg to Gabon.

Time

The Rail Protocol entered into force on 8 March 2024. This does not flow from the provision in the protocol on entry into force, but rather from an agreement in the Ratification Task Force of the Preparatory Commission, the intergovernmental group mandated to pilot through the implementation.