The public service exemption under the Luxembourg Rail Protocol: The right balance between the public and private interests?

This chapter examines the public service exemption under Article XXV of the Rail Protocol (RP) and evaluates whether this exception strikes the right balance between the creditors’ private interests against the interests of the public. On the one hand, secured creditors need to be certain that in case of the debtor’s default they will be able to enforce their international interests in the railway rolling stock. This legal certainty is essential in reducing the risks for the creditor and consequently reducing the cost and increasing availability of the credit for the debtor. On the other hand, repossession, sale and exercise of some other remedies can disrupt an important public service performed by railway systems, which can have economic and political ramifications. This chapter explores the exemption’s rationale and its constituent elements. It specifically focuses on: the content of a declaration, required to be made for a Contracting State to invoke this exemption; the meaning of the concept of ‘public importance’ and whether this is a matter falling within the RP or is to be decided based on a Contracting State’s discretion. This chapter also evaluates the extent to which the exception protects the interests of the creditors.