Following up on my post from last February on Ben Chabot's and Mitu Gulti's "Santa Anna and His Black Eagle: The Origins of Pari Passu?," here's the latest on pari pasu... First, a paper from my colleague Mark Weidemaier, titled mysteriously "Indiana Jones, Contracts Originalist." Cribbing now from the abstract:
The process of drafting a contract can be routine, almost automated. Over a long enough time, lawyers may stop paying attention to contract language or even forget why it is there. The problem is acute with standard-form contracts and perhaps especially so with financial contracts such as sovereign bonds. How should courts interpret contract language when neither the parties, nor their lawyers, nor any other relevant player in the market can credibly explain what it does? This essay addresses this question in the context of one of the most contested interpretive questions in modern international finance: the meaning of the pari passu clause in sovereign bonds.
Second, a paper from Sung Hui Kim, "Pari Passu: The Nazi Gambit." Cribbing now from her abstract:
As the ongoing court battle between the Republic of Argentina and NML Capital, Ltd. illustrates, the meaning of pari passu in sovereign debt contracts remains highly contested. This Article presents what might be the clearest historical evidence of what the pari passu clause was understood to mean in the pre-war period. It examines Germany’s defaults on the Dawes and Young Loans during the 1930s. It finds that parties adopted the understanding that the pari passu clause obliged sovereign debtors to pay different creditor groups on par, particularly when they were from different nations, as was the case with the various tranches of the Dawes and Young Loans. In addition, this Article finds no evidence relating to this historical episode to support what may be the most commonly offered interpretation for the clause today—that the pari passu clause was intended to prohibit the sovereign from passing laws that would have the effect of involuntarily subordinating certain creditors.
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