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]

Latin Indo-European language of the Italic family

Latin is a classical language belonging to the Italic branch of the Indo-European languages. The Latin alphabet is derived from the Etruscan and Greek alphabets and ultimately from the Phoenician alphabet.



Adjective part of speech that describes a noun or pronoun

In linguistics, an adjective is word whose main syntactic role is to modify a noun or noun phrase. Its semantic role is to change information given by the noun.

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".

<i>Blacks Law Dictionary</i> law dictionary widely used in the United States

Black's Law is the most widely used law dictionary in the United States. It was founded by Henry Campbell Black (1860–1927). It is the reference of choice for terms in legal briefs and court opinions and has been cited as a secondary legal authority in many U.S. Supreme Court cases.


In inheritance

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

Per capita is a Latin prepositional phrase: per and capita. The phrase thus means "by heads" or "for each head", i.e., per individual/person. The term is used in a wide variety of social sciences and statistical research contexts, including government statistics, economic indicators, and built environment studies.

Per stirpes is a legal term from Latin. An estate of a decedent is distributed per stirpes if each branch of the family is to receive an equal share of an estate. When the heir in the first generation of a branch predeceased the decedent, the share that would have been given to the heir would be distributed among the heir's issue in equal shares. It may also be known as strict per stirpes or the old English approach, and differs from distribution per capita, as members of the same generation may inherit different amounts.

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.


A testator is a person who has written and executed a last will and testament that is in effect at the time of his/her death. It is any "person who makes a will."

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". There have been cases where decisions were based on different interpretations of the term. [4] [5]

Bankruptcy legal status of a person or other entity that cannot repay the debts it owes to creditors

Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor.

Pro rata is an adverb or adjective, meaning in proportion. The term is used in many legal and economic contexts. It is sometimes spelled pro-rata, but this is technically a misspelling of the Latin phrase. In North American English this term has been vernacularized to prorated.

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]

See also

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  2. The pari passu rule, which reflects the principle that statutory provisions for pro rata distribution may not be excluded by a contract which gives one creditor more than its proper share.

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  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'.
  2. "Pari passu". Business Dictionary.
  3. Henry Campbell Black. "Black's Law Dictionary". 2nd Edition. West Publishing. Retrieved 10 December 2012.
  4. 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."
  5. 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."
  6. Stevis, Matina; Burne, Katy. "Greek Legal Maneuvers Raise Fears of Euro-Zone Debt Fallout". Wall Street Journal. Retrieved 29 July 2014.

Further reading