My noble Friend, the Minister of State for Transport, Baroness Kramer, has made the following written ministerial statement:

The Government have decided to opt in to the proposed Council decision on the approval on behalf of the European Union of the Luxembourg protocol to the convention on international interests in mobile equipment on matters specific to rolling stock, adopted in Luxembourg on 23 February 2007.

The Luxembourg rail protocol is intended to facilitate the financing of high-value railway rolling stock by seeking to ensure protection, for example of a leasing company’s rights against defaulters by a method of central registration, priority and common contractual terms. One of the purposes of this is to reduce the costs of leasing contracts for rolling stock. The rail protocol does this by providing an international mechanism whereby financial interests in railway rolling stock may be registered in a central database. Where an interest is registered a rule of priority would operate in favour of that interest, so protecting the investment where the operator of the rolling stock defaults on his obligations. The financial interest is protected and recoverable except when those financial interests rest in public service rolling stock in respect of which an appropriate declaration has been made. Protecting an investment in this way increases the confidence of leasing companies, and could thereby lead to a reduction in costs for industry.

The proposal has been published with a legal base falling within title V of part three of the treaty on the functioning of the European Union (TFEU)—Justice and Home Affairs (JHA) matters. The citation of a title V (JHA) legal base would usually mean that there would be universal acceptance that the UK’s JHA opt-in protocol applies and that the UK would therefore be free to choose whether to participate. However, the EU institutions do not accept that the JHA opt-in protocol applies when the relevant JHA provisions fall in an area of exclusive external competence—as is the case here. The Government believe that the UK opt in under the protocol to title V of the treaty on the functioning of the European Union applies and they have therefore asserted their right to choose whether to opt in; they have decided it is in the UK’s best interests to do so.

The Government consider that the protocol is clearly advantageous to the UK and European rail industry, would provide greater security for the leasing companies of rolling stock, and would be beneficial both to borrowers by stimulating increased flows of capital at lower cost, and to equipment suppliers.