Pari passu

Pari passu is a Latin phrase that literally means "with an equal step" or "on equal footing". It is sometimes translated as "ranking equally",^[1] "hand-in-hand", "with equal force", or "moving together", and by extension, "fairly", "without partiality".^[2]

Etymology

pari is the ablative singular masculine (since it must grammatically agree with passu) of the adjective par, "equal". If it were nominative, "an equal step" it would be par passus.
passu is the ablative of the Latin noun passus, "step".

This term is commonly used in law. Black's Law Dictionary (8th ed., 2004) defines pari passu as "proportionally; at an equal pace; without preference".

Usage

In inheritance

In inheritance, a pari passu (per capita) distribution can be distinguished from a per stirpes (by family branch) distribution.^[3]

For example, suppose a testator had two children A and B. A has two children, and B has three.

If the testator leaves his or her entire estate to his or her grandchildren in equal shares pari passu, each grandchild would inherit one fifth of the estate.
In contrast, if the estate was left to the grandchildren per stirpes (by family branch), the children of A would share one half of the estate equally between the two of them, and the children of B would share one half of the estate equally amongst the three of them.

In lending, bankruptcy and default

This term is also often used in the lending area and in bankruptcy proceedings, where creditors are said to be paid pari passu, or each creditor is paid pro rata in accordance with the amount of his claim. Here its meaning is "equally and without preference". There have been cases where decisions were based on different interpretations of the term.^[4]^[5]

In the European Union, as the result of the Greek government-debt crisis, a retroactive collective action clause passed by the Greek government with the support of the ECB and IMF, enabled the debtor (who also controlled the courts) to impose a 70% loss on the creditors, more than 75% of whom had voted in favour of the cut. In this case, pari passu means that all private-sector investors are equally treated.^[6]

References

Notes

^ Briscoe, Simon; Fuller, Jane (2007). Harriman's Financial Dictionary: Over 2,600 Essential Financial Terms. p. 348. Ranking equally, meaning literally 'with equal step'.
^ "Pari passu". Business Dictionary. Archived from the original on July 31, 2014. Retrieved July 29, 2014.
^ Henry Campbell Black (November 4, 2011). "Black's Law Dictionary". 2nd Edition. West Publishing. Retrieved December 10, 2012.
^ Devi Sookun Stop Vulture Fund Lawsuits: A Handbook 2010 p34 2010 "The case succeeded because the court departed from the traditional meaning of the term pari passu. This section looks first at the original case of Elliott Associates v Republic of Peru."
^ Lloyd's maritime and commercial law quarterly 1983 "Obviously Lord Scott, in leaving out the preferential creditors, does not use the term pari passu in its multi-layered sense. Instead, his Lordship was referring to pari passu in its orthodox meaning."
^ Stevis, Matina; Burne, Katy (February 23, 2012). "Greek Legal Maneuvers Raise Fears of Euro-Zone Debt Fallout". Wall Street Journal. Retrieved July 29, 2014.