Olden Pari Passu in Scotland Lay

Abstract

It is commonly argued that no one today seems to know what a pari passu clause is doing in a sovereign debt contract. This is a problem, for pari passu is one of the most prominently displayed covenants in such documentalia. Having an utterly ubiquitous and utterly misunderstood piece of legalese hanging around numerous multi-multi-million contracts can yield untold confusion and tribulations (witness the 2011-2016 Argentina episode, for instance). Some posit that if we only knew what the clause was intended to mean when it was first used, then we will know what it should stand for today. Thus was born a new discipline: pari passu paleontology. Several elite experts have been busy scouring the past history of sovereign debt trying to dig up the original pari passu. Here I make a humble contribution to the field. I have found a sovereign pari passu from 1707. Both the context surrounding this particular clause (the Treaty of Union between England and Scotland) and the apparent intended meaning of the legal wordage (payments equality) make for an attractive case study, with potentially significant (even if perhaps not entirely welcomed) lessons for today´s researchers and practitioners.