Italy's Pari Passu Scrubbing
Italy does not do things half-way. Of all the pari passu clauses on the planet, it had the one that most definitely, unambiguously, no-two-ways-about-it promised ratable payment to its bondholders. In English. Just search for "ratably" here. This got Italy some bloggy grief.
After the Second Circuit interpreted Argentina's pari passu clause to mean ratable payment, some governments chose to ponder the impact of the decision in the Risk Factors section of their securities disclosure. Heads up, investors--future restructurings might be tricky!--they said. Though apparently not tricky enough to change their own contracts.
In contrast, Belize made the radical move to "clarify" its already-narrow pari passu clause to exclude the ratable payment interpretation. A new domestic law limited the government's capacity to promise ratable payment. Belize then explained in its offering documents that it understood the pari passu clause to mean ranking-only, and had no authority to agree otherwise. Even if a creditor were to tell a court later that she had meant "ratable payment," the court would know that Belize had meant ranking, and that creditors had been on notice. Contract interpretation rules frown on parties who try to enforce their private meanings when they know that the other side means something completely different.
Meanwhile, Italy quietly took the most vulnerable pari passu clause ever, deleted the ratable payment language, and added an exception for seniority conferred by treaty:
The Securities are the direct, unconditional and general and …unsecured obligations of Italy and will rank equally with all other evidences of indebtedness issued in accordance with the Fiscal Agency Agreement and with all other unsecured and unsubordinated general obligations of Italy for money borrowed, except for such obligations as may be preferred by mandatory provisions of international treaties and similar obligations to which Italy is a party. … Amounts payable in respect of principal of (and interest on) the Securities will be charged upon and be payable out of the [Treasury of Italy], equally and ratably with all other amounts so charged and amounts payable in respect of all other general loan obligations of Italy.