The club of Paris is an abstract group of Créancier S public the purpose of which is to find solutions coordinated and durable with the difficulties of payments of involved in debt nations. This forum was created little by little since 1956 when the Argentine agreed to meet its public creditors in Paris, it treats the national debts i.e. those of the governments and those of the private sector guaranteed by the public sector. The other debts are managed by the Club of London, based little by little during the Seventies on the model of the club of Paris, and which is an abstract group of trade banks which meet to negotiate the credits that they hold on sovereign debtors. Since its creation the club of Paris or groups ad hoc of creditors members of the Club of Paris concluded 398 agreements on 81 involved in debt countries. 19 countries are permanent members, they hold the majority of the bilateral official credits in the world and can take share with the negotiations: the Germany, the Australia, the Austria, the Belgium, the Canada, the Denmark, the Spain, the the United States, the Finland, the France, the Ireland, the Italy, the Japan, the Norway, the Netherlands, the the United Kingdom, the Federation of Russia, the Sweden and the Swiss .

When the credits rééchelonnables of a creditor of the Club of Paris are lower than a threshold known as of minimis , this creditor takes part then in the meetings as an observer and its credits are not re-spread, this with an aim of preventing the treatments which would not have a significant impact in term of lightening of the debt and which would prove expensive to implement. Other public creditors can also take part in the sessions of rééchelonnement if they granted governmental loans or secured credits by the government or a public agency, subject to the agreement of the permanent members and the debtor country. Moreover of the observers of the international institutions take part in the meetings: the the IMF, the the World Bank, OECD, UNCTAD, the European Union and the regional bank of development concerned (African Bank of development, Asian development bank, inter-American Bank of development…). The creditor countries meet 10 to 11 times per annum at Paris for sessions of negotiations, under the presidency of the director of DGTPE (Xavier Musca in 2007).

Organization

Since the years the 1950 multilateral renegotiations of the national debts were first of all appeared as simple International Conferences joining together the creditor States on a purely occasional basis. The creation of the Secretariat to the beginning of the year 1970 gave the first institutionalization to the Club of Paris, conferring to him by there a character of permanence, then the emergence and the consolidation of the two authorities “Methodological Sessions” and “Reviews” at the beginning the years 1980 continued the institutionalization of the Club of Paris. The regrouping of the various clubs of creditors under the official term of “Club of Paris” dates from second half of the years 1970 when the renegotiations of the debts obtained an international attention at the time of important debates within the Conference on the international Economic cooperation (CCEI) and from UNCTAD. The three authorities with which the Club of Paris was equipped during its existence consist in more effectively framing the meetings of renegotiation, in order to be able to face the increasing needs posed by the big number of the renegotiations. The Secretariat is composed of about fifteen people resulting from the direction from the French Treasury and who work part-time for the Club of Paris. Its tasks mainly aim safeguarding the shared interest of the creditor governments taking part in the Club, and at facilitating the result of a consensus between them on all the levels of the discussions. To reach the Secretariat that point the session of renegotiation like its unfolding prepares: it is with him that the request for renegotiation of a debtor State in difficulties is addressed, following what this authority prepares several working papers intended to tally the discussions during the negotiations, it proposes various assumptions of refitting (the “Magic Table”) which will make the subject of debate between the creditors and finally it prepares a proposal of Procès-verbal (it is about a standard form of agreement according to the category of debtor countries). Then the Secretariat generally assumes the presidency of the meeting of renegotiations; at the conclusion of the deliberations with door-close between creditors (where those agree on the terms of refitting which they will grant the debtor) the general secretary with the responsibility to submit to the delegation of the debtor the terms which the creditors are close agreeing to him. Often this last refuses them first once from a point of view of strategy, and abstract negotiations are then undertaken between the general secretary, acting in the name of the creditors, and the chiefs of the delegation of the debtor State. Finally the secretariat chairs the plenary session joining together creditor and debtor in order to sign the official report. In addition to its function essential to support the renegotiations at their various stages, the Secretariat also contributes to ensure the respect of the various engagements contained in the official reports and maintains the foreign relations with the third creditor States as well as the trade banks with an aim of taking care of the largest possible respect of the clause of the most favoured nation with third creditors. The methodological sessions are charged to define the principles of the policy of the club of Paris by working out new orientations for the refitting of the debt, and to find solutions with questions of more concrete and technical nature (the formulation or the concrete application of the official reports, practical matters related to the principle of non-discrimination between the creditors…), some work then in theory renegotiation. They are convened on the initiative of a creditor government or Secretariat of club of Paris and the decisions which are adopted there (by consensus) give place to Non-Papers (denomination related to their confidential character) which circulate then with the national plan between the implied authorities (ministries for Finances, of the Development, agencies of export credit…) for information and to bring to discussions to the internal plan in order to before harmonize the respective positions subsequent meeting of the Club of Paris. Finally the Reviews last a day in general and consist in establishing a forecast of the future renegotiations, they are a plenary authority deprived of decisional capacity, the creditor governments examine there a score of debtors in order to envisage which are likely to represent themselves and compare with it their bilateral agreements in order to make sure that they are refunded in a not-discriminatory way. The Reviews also make it possible to the creditors to decide attitude to adopt with respect to their debtors during a forthcoming renegotiation, the latter depending on the good will that the latter will have expressed as well as difficulties encountered in the realization of their engagements. The national delegations of the Club of Paris being mainly made up skilled technicians, when eminently political decisions are to be adopted, it is the Group of the 8 which is given the responsability to treat these cases and which informs the Club of the policy to be followed. The bonds between these two groups are ensured by the president of the club of Paris because he is also director of the French Treasury and thus takes part sometimes in the tops of the G-8 at the sides of the Minister for Finance in the quality of “under sherpa” economic (i.e. of assistant for the questions of economy).

The the IMF takes part in the meetings of renegotiation included/understood there door-close between creditors, with the methodological Sessions and the Reviews to bring its technical expertise there. The World Bank is allowed with the renegotiations but not with door-close between creditors, it takes part only exceptionally in the methodological Sessions and is allowed from now on regularly with the Reviews. As for the UNCTAD the Club of Paris tolerates its presence with an aim of alleviating the claims of the developing countries, it is allowed only with the public meetings of the renegotiations where it is made the lawyer of the the DEVELOPING COUNTRIES, in particular when it makes a statement on the situation of the debtor to it: it accentuates the need for bringing a substantial lightening of the debt of this one from the point of view of not block the development efforts which he made.

The fact of not having statutes, but only one certain number of principles and rules, makes it possible the Club of Paris to be more flexible vis-a-vis the various situations of the debtors meeting of the difficulties of payment. The absence of texts setting up the Club of Paris and its various authorities, also makes it possible the creditor States to maintain this forum in a kind of informality which avoids the systematization of the recourse at this usual institution for renegotiations of debts, it acts to cultivate by there the impression which these renegotiations are exceptional. The absence of formalization of the rules of renegotiations also takes part of this objective. On this point, this forum presents a fundamental legal paradox: while the creditor States on several occasions affirmed that pacta sunt servanda , i.e. in fact that the obligations of refunding contained in the contracts of credit of origin must be respected, the renegotiations in front of thus for this reason being regarded as exceptional, a body of rules provided with a true legal effectiveness nevertheless developed.

Operation

The rules and the procedure of the club of Paris are far from being the subject of an international consensus, in particular among the debtor States, but the latter continued to be addressed to the Club being given the little of alternative solutions offered by the international law vis-a-vis the non-payment (either to repudiate its debts openly, or to plead the play of the clause Rebus sic stantibus).

It is with the debtor country to contact the club of Paris, it has the right to make it only if it is in suspension of payment and it must provide a description detailed of its economic situation and financial; moreover it must be under program of the IMF and this institution must show that this country is not able to respect its obligations as regards debt and thereafter the level of treatment of the debt is founded on the financing need identified in the program of the IMF. The negotiation does not lead directly to a legal document between the debtor country and the public creditors concerned: the latter sign an approved official report which is a recommendation with their governments on behalf of the chiefs of delegation of the creditor countries to sign bilateral agreements with the debtor country. When there are only some creditors concerned with a treatment of the debt, the agreement of the club of Paris is called “terms of reference” instead of approved official report. The official reports concluded under the aegis of the club from Paris, without constituting treaties, deploy legal effects which sometimes can exceed those produced by formal legal agreements. They are signed in briefs times it more often after two days of renegotiations by the chiefs of the national delegations, all provided with full powerss within the framework of the limits posed by the instructions of the respective capitals; in general the delegations of the creditors are carried out by a senior official of the Ministry for Finances (the USA make exception because their delegation is carried out by the representative of the Ministry for Foreign Affairs), and those of the debtors by their Minister for Finance (what translates the importance that those attach to the final official report). In spite of the fact that they are regarded as very constraining, the creditors refuse to allot obligatory legal authenticity to the official reports in order to maintain the exceptional character which must be inherent in the renegotiations of the debts, the conclusion of the multilateral agreements of renegotiation in the form of treaties would be likely to involve the recognition of a right to renegotiation for the debtors, which goes against the concern of the creditors of avoiding any process of “juridicisation”. This solution also makes it possible to withdraw the official reports from a possible legal examination like the international attention, the club of Paris wishing as much as possible giving a confidential character on its activities. Accordingly, the club of Paris being surrounded in a general way of confidentiality, the approved statements only are exceptionally published, while the availability of the bilateral agreements depends on the practice of the States (the USA and the United Kingdom appear among the rare countries which publish these agreements in their official journals), and for the club of Paris the latter constitute the juridically obligatory act. On the other hand, it arises from the debates of UNCTAD that the debtors could be juridically obligatory partisans of official reports well, under the terms of their claim with being able to subject the payment of their debts to an independent court. The club of Paris on a case-by-case basis makes its decisions in order to adapt to the situations of each debtor country, it must have a consensus of the participating creditor countries there. The club of Paris was as of its origin a burning defender of the principle of non-discrimination among the creditors, which appeared very clearly in particular as from 1982 when the international crisis began from the debt: taking into account the importance of the amounts due to the trade banks, the creditor governments wanted to be sure that these last would not profit from a preferential treatment with depend on the club on Paris. The principle of non-discrimination has as a finality the equal share of the burden of the debt between the creditors. It comprises two shutters in its application between the club of Paris and the creditors third: one material, the comparability of treatment, and the other technique, the clause of the creditor more supported, by whom advantages conferred on a creditor are automatically granted to the other creditors. To arrive at the comparability of treatment between the various creditors, the club of Paris asks the debtor to be committed seeking near the nonmultilateral creditors, and in particular near the public creditors non-member of the Club of Paris and the private creditors (Banque S, Stockholder bond, Fournisseur S…), one rééchelonnement in terms comparable with those negotiated in the approved official report. If the debtor country does not take this initiative or if it insincerely shows with regard to the Club Paris, this last can either match the following renegotiations of adverse conditions, or to suspend the application of the official report what involves the return to the validity of the trust deeds of origin. However specific factors (the risk to disturb the international business of the debtor for example) can justify not to require comparable treatment for a given creditor or an instrument of debt given.

When a country passes to the club of Paris for the first time a deadline is defined and will not be modified any more in the secondary treatments in club of Paris: the appropriations granted after this date will not be subjected to rééchelonnement, in order to rééchelonnement protect the appropriations granted by the creditors from the Club of Paris after one and thus to restore the access of the debtor country to new export credits. Indeed, if the Agences of credit to export are assured that the loans granted after this date are excluded from the renegotiations, they will be able to again take again their financial affairs with the debtors without running the risk of a failure on these new appropriations. The reorganization applies to the engagements signed before the deadline even if their implementation (disbursement of the credit or delivery of the products) takes place after this date. For these engagements one defines a new bill book of refunding, therefore part of the debt which had immediately or in the near future is given to a latter date by one differed from payment and if this differed over a few years one is defined speaks about reshaping and beyond it is one rééchelonnement. The categories of debts renégociables within the Club of Paris relate to the loans contracted by a State or guaranteed by him, at another State or public agency; these debts relate to mainly export credits guaranteed or ensured by the agencies main road of export credit, the loans of development and the mixed appropriations. The short-term credits, the loans lower than a certain amount (determined by the clause known as of minimis and calculated for the whole of the debts contracted towards a country, it generally rises to a million special drawing rights), the debts having already been the subject of a refitting as well as the debts towards the international organizations are not likely to be renegotiated. Intended mainly to finance vital commercial exchanges for the debtor country, the Short-term credits, i.e. lower than one year, must be refunded according to the original expiries in order not to compromise the access of the debtors to these markets of capital. As for the debts which were already renegotiated, the creditors are reticent to again include them in order to preserve the confidence of the backers. Finally the debts towards the international organizations are likely to be renegotiated since 1996 within the framework of the initiative heavily in debt poor countries (PPTE), applied by the Club of Paris through the Termes of Cologne, except this precise case the debtor must respect his obligations towards the multilateral creditors before the debt servicing of any other creditor.

A standard agreement in Club of Paris consists of a lightening of flows, which results in what is called the “consolidation period”, during which applies the agreement and which corresponds to the duration of the financing need which can be covered only by one rééchelonnement of debt or a refinancing within the framework of the program of the IMF; in general it lasts one year so that it coincides with the duration of the agreement of confirmation concluded beforehand by the debtor, but can be longer if the program of the IMF implies one higher duration (broad agreement or agreement with the title of the Facilité for the Reduction of Poverty and the Growth). At the end of the consolidation the refunding of the expiries due to the creditors of the Club of Paris for this period is due according to a new bill book. Moreover other treatments in Club of Paris apply to the whole of the stock of debt and either only to the payments due over a given period: they are the treatments of stock, the objective of any agreement in this field being to provide to a country a final treatment by the Club of Paris one speaks about rééchelonnement about exit. One finds this type of agreement within the framework of the initiative PPTE and for the countries having good references passed in their relationships to the Club of Paris and the IMF and for which there is a confidence sufficient in their capacity to respect the agreement in Club of Paris. The re-spread amounts are seen applied new interests known as interest on arrears or interests to the consolidation. The treatments of the stock of debt generate interests on the consolidation more important than those resulting from a treatment of flow. The approved official reports envisage three axes for the definition of interest rates used: the suitable rate of market which corresponds to the standard interest rate of the currency considered to which is added a margin of management (this rate perhaps fixed or variable), the post maturity interest which is the interests receivable on the arrears are seen applied an interest rate equal to the suitable rate of market to which is added a penalty, and finally “the Taux concessional at least as favorable as the initial Taux concessional”, which means that interest rate applied is weakest between the initial concessional rate of the restructured appropriations and the suitable rate of current market. The first date of payment of a re-spread debt takes place in the middle of the period of Consolidation for the treatments of flow and the date of stock for the treatments of stock, but a grace period can be granted with an aim of deferring this date. The agreements in Club of Paris can contain a clause which allows the creditors who wish it to resort to the Conversions of credit S in kind, in assistance or in other operations in local Monnaie. Often these operations take place by transfer of the debt by a creditor country with an investor who sells the debt with the debtor country in exchange of shares in a local company or in exchange of local currency used for projects in the country concerned. When the treatment of the debt results in a reduction in its current net amount (sum brought up to date with the suitable market rate of the annual installments remaining to run on a debt) one speaks about concessionnality or concessional treatment; it is either about a cancellation of part of the credits, or of rééchelonnement of the debt over one long period with an interest rate lower than suitable market rate. Within the framework of a concessional treatment each creditor can choose between two options to reach the necessary reduction of the clear current value of the credit which it holds: the option DR. (reduction of the debt) consists of a cancellation of part of the amount of the clear current value of the debt, and option DSR (reduction of the debt servicing) results in rééchelonnement with an interest rate lower than suitable market rate. Within the framework of these concessional agreements certain debts previously reduced can be the subject of a new treatment whose rate of cancellation is higher, one says that there is Topping-up preceding treatment new. In order to be eligible with a concessional treatment (currently terms of Naples), a debtor country must be eligible with the financings of the the International Development Association (AID) by the World Bank i.e. to belong to the group of the least advanced Countries.

Members

The 19 permanent members of the club of Paris are governments having credits on a big number of other governments in the world (these credits can be held on line or through their suitable institutions).

Recent facts

November 21st 2004: Bearing agreement on the debt Iraq ienne for a reduction of 80% of the 33 billion USD had by the Iraq.

January 12th 2005: The club of Paris proposes immediate moratorium an “and without condition” on the debt of the countries of Asia touched by the tsunami of 2004 and which will make the request of it. The Sri Lanka, the Indonesia and the Seychelles are interested, but still hesitate to accept this carryforward of debt not to send negative signals to the markets.

August 21st 2006: The Russia announces to have regulated by anticipation the whole of its debt towards the Club.

See too

Random links:Antoine Predock | Katoomba | Old man-Welsh | Georges Moréas | Guy Hermier