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The Paris Club in the International Law Context Essay

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Updated: Jan 17th, 2022


The Paris Club is a group of official creditors that functions according to a set of principles and regulations, but does not have a legitimate status. Despite being informal, for sixty years the club was successfully dealing with distressed countries all over the world, providing the rescheduling treatment of government debts. This paper aims to analyze the possibility of such an institution within the principles of international law and commerce and define whether the legal status is obligatory to achieve effective results in this field.

The Principles of the Paris Club

The Paris Club exists since 1956 and has reached 433 agreements covering 90 debtor countries with a total amount of debt of 583 billion dollars (Paris Club Official Website, n.d.). The role of the creditors is to investigate coordinated and sustainable solutions for debtor countries encountering payment difficulties. Paris Club grants proper debt treatment, while the defaulting country initiates reforms for stabilization and rehabilitation of its economic situation. The debt treatments are provided using rescheduling that is “debt relief by postponement or, in the case of concessional rescheduling, reduction in debt service obligations during a defined period” (Paris Club Official Website, n.d.). At the moment Paris Club consists of 20 permanent members. Any other country that meets the conditions is entitled to participate in negotiations. Sometimes a third party has a right to attend a meeting if its presence is relevant to the case. The Club assembles every month and is run by a Secretariat General.

In its activity, Paris Club abides by the Six Principles. They are solidarity, consensus, information sharing, ‘case by case’ approach, conditionality and comparability of treatment. Solidarity implies that all members should work as a team, respect the interests of each other and manage their claims accordingly. All members must reach a consensus concerning a case before making a decision. All creditor countries share information that is crucial for the case and receive confidential data from an International Monetary Fund. The important principle that explains the non-formal status of the Club is its work on a case-by-case basis. Each defaulted country has its specific circumstances and, therefore, requires an individual approach in debt management.

Paris Club only deals with the states that need debt relief and can furnish the creditors with documentary evidence of their financial issues. These countries have to initiate and commit to initiating specific reforms required for the rehabilitation of their financial situation. Finally, the country should be involved in an existing program facilitated by International Monetary Fund. “The level of the debt treatment is based on the financing gap identified in the IMF program” (Paris Club Official Website, n.d.). Comparability of treatment implies that a creditor state cannot provide treatment on more favorable terms than the terms agreed by all the Club members.

The negotiations always result in concluding a document called Agreed Minutes that is signed by the Chair, the representative of the defaulted state and all creditors. It does not have a legally-binding nature and guides for all parties to enter into bilateral agreements and accomplish the provisions of the Agreed Minutes. The following bilateral agreements “give a legal effect to the agreement reached during the negotiating meeting” (Paris Club Official Website, n.d.). As it follows from the philosophy and the experience of the Paris Club, it functions by a normative framework, and was proved efficient despite its non-formal status.

The Paris Club and the International Law

There is no doubt that international law administers a system of approaches for sorting out global issues. However, the very concept of international law has always been controversial. Many legal professionals argue, whether it is appropriate to call it ‘law’ at all. It does not have a perfect system of rules and requirements that would be equally applicable to each state in the world. Indeed, international law is not an impeccable legal framework; however, the national legislation of any country is not perfect either. Martin Dixon states in his work: “In a new reality, international law is accepted more like a political and moral force, but not a legal discipline” (Dixon 2013, p. 1). In a very similar way Herman, Ocampo, and Spiegel (2010, p. 329) describe the concept of the Paris Club agreements: “The binding nature of the Agreed minute is more of a moral and good faith nature than a legal one”. All creditor nations involved in Paris Club activity have a developed reputation in a political and economic world they need to maintain. All members would benefit from respecting each other, abiding by the terms and regulations in order to achieve the common goal.

The legal status of an institution does not necessarily guarantee its efficiency. Non-formal position allows it to be flexible in handling various cases of defaulted countries. The adjustability of rules is also justified by the need to deal with each state on an individual basis. The fact that the countries of the world are not equal in their power, geographical conditions and benefits, military and economic situations, makes it incredibly challenging for everyone to correspond to the demands of the international law. There are various ways for developing countries to get financial help from other nations. These countries can invite investments, gain grants, or borrow money from the international community. If the country decides to borrow money, it has to make sure that it will be able to repay the debt later. If the government can use the money effectively, the income it gets would both cover the debt and provoke economic growth of the state. However, according to the Paris Club criteria, “for the poorest and most indebted countries, the accumulated debt burden has become a drawback for development” (Paris Club Official Website, n.d., para. 3). Considering an unofficial position of the Paris Club, it is adjustable while dealing with different countries on case by case basis. The treatments provided by the club, include four types that depend on the economic condition of a debtor country. Any state entitled to relief is treated by the Classic Terms. Houston Terms are applied to middle-income states with significant debts, and Naples Terms concern third world countries with significant debts. The last ones, Cologne Terms, deal with the states “eligible for the IMF and World Bank’s Highly Indebted Poor Countries Initiative (HIPC)” (Weiss 2013, p. 3). It is important to note that the terms for poor countries include the remission of debt apart from rescheduling.

Many experts do not agree that the Minutes should only be seen as absolutely non-committal documents. Espósito and Bohoslavsky (2013, p. 51) state in their work: “The Agreed Minutes that conclude Paris Club negotiations about debt restructurings constitute exercise of international public authority”. They influence the economic state of the debtor country, while defining the terms of the agreement with the creditor. Since all the members of the Paris Club are the leading countries with highly developed economies, they are capable of performing the Agreed Minutes with maximum efficiency. They are able to “frame and stabilize the normative expectations of all actors involved or affected including the citizens of defaulting and lending states” (Espósito & Bohoslavsky 2013, p. 52). The principles and terms of the Club correspond to common standards of debt rescheduling. The scheme is developed and agreed upon by the general consensus of all countries concerned, and, therefore, “constitute an implicit form of international soft law” (Espósito & Bohoslavsky 2013, p. 52). It is important to consider the principles regarding preliminary obligations in the context of international law. Being signed by the official representatives of both debtor and creditor nations, the detailed recommendations and terms stated in the Agreed Minutes would definitely have a certain legal consequence (Martha 2015, p. 236). The future bilateral agreements define the cost of all debt management procedures. The creditor country that signs the Agreed Minutes pledges to follow the terms and acknowledge that this document means the accomplishment of the minutes.

As stated in its Six Principles, The Paris Club works in cooperation with International Monetary Fund. The IMF provides information about the country and analyzes the total amount of debt to be covered by the relief. The Paris Club then investigates the capabilities and interests of its member states and allocates the relief accordingly. Herman, Ocampo, and Spiegel (2010, p. 329) agree that despite being informal, “this is the first creditor-based attempt to establish a comprehensible international framework for sovereign debt restructuring”. While it might not be the organization with a regal appearance, it does not have any successful legal prototypes.


The possibility of establishing and running an effective non-formal creditor institution is proved by the Paris Club and fairly corresponds to the controversial nature of international law and commerce themselves. For about sixty years of its activity, the Club managed to sort out the cases of 90 distressed countries and still does not have any equals in its field. The flexibility, provided by its non-legal status, allowed the creditors to seek an individual approach to the problem of each separate state. It is only possible to undertake the appropriate measures for the implementation of debt treatment, while working on a case-by-case basis. The fourth principle of the Paris Club applies to international law as well. When dealing with global problems and international conflicts, it is extremely challenging to reach a consensus between two countries with two different national legislations. Hence, meeting the needs and interests of all 195 of them with only one set of rules, does not appear realistic at all. This must be the main argument of those who call into question the very idea of international legislation. Nevertheless, the global processes of today, such as political interactions, international financial procedures, cultural exchange, and migratory movements, all function by a system of norms, developed by international law. Just as the Paris Club state in its principles, the terms of such processes are established by a consensus of all the parties concerned.

Reference List

Dixon, M 2013, Textbook on International Law, OUP Oxford.

Espósito, C, Li, Y & Bohoslavsky, J P 2013, Sovereign Financing and International Law: The UNCTAD Principles on Responsible Sovereign Lending and Borrowing, OUP Oxford.

Herman, B, Ocampo, J A & Spiegel, S 2010, Overcoming Developing Country Debt Crises. Initiative for Policy Dialogue, OUP Oxford.

Martha, R S J 2015, The Financial Obligation in International Law, Oxford University Press.

Paris Club Official Website n.d., Web.

Weiss M A, 2013, ‘The Paris Club and International Debt Relief’, Congressional Research Service, Washington, DC.

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