In April 2013, as a result of the failure to get relief in the courts and because the market seemed unable or unwilling to fix the pari passu problem on its own, an effort to solve the problem began at the Spring IMF/World Bank Meetings.
As of early 2017, the IMF's latest report on revisions to pari passu reveals that a majority of pure sovereign issuers have now clarified or modified outright their pari passu clauses.
The strongest AAA issuers, the United States, United Kingdom, Netherlands, Japan, Germany and France, are not included: owing to their strong credit, they do not use traditional contracts with pari passu clauses to sell their bonds.
We turn next to focus on the primary questions of whether and how the pari passu clauses changed in the wake of the NML v.
Our hypothesis was that the market would either delete the pari passu clause or revise it to reduce the risk of another court adopting the ratable payments interpretation.
The typical and oldest version of the pari passu clause, a clause found in almost every sovereign or quasi-sovereign bond contract, states in essence:
The notes rank and will rank without any preference among themselves and pari passu with all other unsubordinated public external indebtedness of the Republic.
These variations produced several distinct linguistic departures from the original "Rank" version of the pari passu clause.
We term this version of the clause, that provides for explicit ratable payments, the "Pay Equally and Ratably" pari passu clause.
The bonds rank, and will rank, pari passu in right of payment with all of the Issuer's present and future unsubordinated External Indebtedness.
For coding purposes, it is important to recognize that the version of the pari passu clause at issue in both the Argentine and Peruvian litigations was particularly vulnerable to Lowenfeld's pro rata or ratable payment interpretation: the word "payment" was used to modify the promise on the part of the issuer that the bonds would "rank equally.
In these bonds, the standard pari passu language gets supplemented by words such as "except as subject to provisions of mandatory law.