The First Sovereign Pari Passu? It's All Scottish to Me

Abstract

I found an 1838 legal document pertaining to debt obligations by a sovereign entity (the City of Edinburgh) that contains a pari passu clause. The clause wording itself is very basic ("rank pari passu") but both the texture of the case and the consequent related possible interpretation of pari passu would not be simplistic. While it may be hard to say for certain, this ancient pari passu (the "oldest" sovereign one on public record, seemingly) may be endowed with the intriguing characteristic of referring to inter-creditor payment parity, and not just legal rank parity (though, again, no explicit mention of payments appears in the clause text itself). If true, this would imply that at least some people saw pari passu as a promise to be paid equally, at the same time and possibly proportionally as the relevant others, long before New York judge Thomas Griesa embraced such interpretation in 2012 to the utter surprise and shock of most sovereign debt legal practitioners and scholars. If my elucubrations are correct, and that might be a long shot, we would have unearthed a primeval pari passu that´s endowed with a message that would be most unwelcome to most of today´s experts. If, as contract paleontologists posit, the key to understanding pari passu is to find its original meaning, the 19th century Edinburgh version may not be possesed with the most instructive purport.