Rail carriers have, essentially, three possible sources of funding for capital investments: direct state aid, indirect state aid (via EU funds); financing through development banks and financial institutions such as the World Bank, the European Investment Bank; debt financing by commercial banks and other financial institutions on the capital markets.
With the historical development and modernization of rail infrastructure and transport, the social and political significance of the industry has tied its financing closely to the state. With the beginning of liberalization of rail services in the 1990s in Europe, the increasing scope of application of state aid rules in the EU, and the increasing demand for capital among rail carriers to fund the acquisition (purchase or lease) of train wagons or refinance existing long-term obligations, there is a growing trend of financing rail carriers by financial institutions (banks) as the dominant source of financing in the industry.
In structuring credit arrangements, domestic and foreign financial institutions require that all property in commercial use owned by a rail carrier registered in the Republic of Croatia be used as security instruments for repayment of loans. The basic requirement is that the security interest is properly established and that there are foreseeable steps in the enforcement of due unpaid claims arising from the credit agreements. The property with the highest financial value owned by rail carriers are train wagons (either owned or leased by the carrier).
This paper features a presentation of the procedure of establishing a security interest on railway train wagons at the international (Rail Protocol to the Cape Town Convention) and national level. It is to be noted that a security interest over train wagons in the Republic of Croatia follows the general regime for establishing pledge rights over movable property. Special attention is paid to the issue of settlement of claim of the creditors.
International regulation of secured claims in the rail industry tend to align the rules to that of the aviation industry, for which an international aircraft security register has been set up, as well as a special register in the Republic of Croatia with which all security instruments over aircraft are registered.
Security instruments over train wagons will continue to be under the general secured claims regime, despite the particularities of such security, until the Republic of Croatia establishes the concepts of taking of security from the Rail Protocol to the Cape Town Convention.
