Pari passu is a Latin phrase that literally means "with an equal step" or "on equal footing". It is sometimes translated as "ranking equally", "hand-in-hand", "with equal force", or "moving together", and by extension, "fairly", "without partiality".

Etymology

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".

Usage

In inheritance

In inheritance, a pari passu (per capita) distribution can be distinguished from a per stirpes (by family branch) distribution. For example, suppose a testator had two children A and B. A has two children, and B has three.

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. 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.