Pari passu

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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]


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".


In inheritance

In inheritance, an in 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. The testator leaves his entire estate to his grandchildren in equal shares in pari passu, each grandchild would inherit one fifth of the estate. If the testator left his entire estate to his 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.

The problem with a per capita in pari passu distribution in the example given is as follows. Assume A dies before B. On A's death a distribution could not be made to his or her children: they would have to await the death of B - on the assumption that B could have additional children, and thereby consequently all grandchildren (of both A and B) would be entitled to less than one fifth each.

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".[4]

There have been cases where decisions were based on different interpretations of the term.[5][6]

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.[7]

See also



  1. Briscoe, Simon; Fuller, Jane (2007). Harriman's Financial Dictionary: Over 2,600 Essential Financial Terms. p. 348. Ranking equally, meaning literally 'with equal step'.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  2. "Pari passu". Business Dictionary.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  3. Henry Campbell Black. "Black's Law Dictionary". 2nd Edition. West Publishing. Retrieved 10 December 2012.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  4. Smith, Mike. "Director's Failure to Pay Taxes Ends in Disqualification". Retrieved 24 July 2014.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  5. 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."
  6. 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."
  7. Stevis, Matina; Burne, Katy. "Greek Legal Maneuvers Raise Fears of Euro-Zone Debt Fallout". Wall Street Journal. Retrieved 29 July 2014.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>

Further reading