Pari Passu at the Beginning? England, 1677

Abstract

The famous Bankers Annuities granted to creditors of Charles II in 1677 contained a covenant that seems to make a clear promise of pro-rata payments to similarly-situated lenders. While the two Latin words are not actually to be found in the evidence I was able to unearth, modern-day observers of sovereign debt legalese may be able to recognize in this 17th century England covenant a pledge of inter-creditor equality similar to what these days would be known as a ratable-payments pari passu clause. Given the crucial role that these Annuities had in the pioneering development of a liquid modern government bond market in England (then as now a leading financial center), it could be asserted that a desire for strong payment equality for holders of sovereign debt would have been present at the very beginning. In that sense, this could be one of the very earliest (the earliest?) samples of such inter-creditor equality covenant pertaining to an advanced modern national debt system. Such specter of primeval ratability may be a sharp contrast to the efforts of so many relevant actors today to erase any notion of pro-rata payments from sovereign debt land.