International Debt Matters Under Georgian Law — What Actually Discharges a Debt
When a debt crosses a border, the practical question is rarely abstract: a creditor in one country wants payment from a debtor whose assets, residence or business are connected to Georgia, or a debtor wants to know whether an obligation can still be enforced against them here. Before anything else, one point must be stated plainly: Georgian civil law contains no special statutory mechanism called international debt discharge, and a declaration of freedom from debt made in a foreign state does not operate automatically in Georgia. What Georgian law does offer is a closed set of grounds on which an obligation is extinguished — release by agreement, set-off, merger of debtor and creditor into a single person, and the completion of a legal person's liquidation.
These grounds are set out in the Civil Code of Georgia and they apply to international debts in the same way as to domestic ones, within the relationships that fall under Georgian jurisdiction. Understanding them matters for both sides of the table: a creditor planning cross-border collection must know which claims survive, while a debtor defending against enforcement can use extinction grounds to close the matter definitively rather than merely delay it.
Release by Agreement — Extinguishing the Debt by Consent
The simplest extinction route is contractual release. Article 448 of the Civil Code provides that release of a debt by agreement between the parties terminates the obligation. In practical terms this means the creditor voluntarily gives up the claim, and once the parties have agreed on the release, the obligation ceases to exist as a matter of law — it is not merely suspended or postponed.
In cross-border practice, release is the natural instrument for structured settlements: the creditor accepts partial payment or a payment schedule and releases the balance, the parties exchange mutual releases after a commercial dispute is compromised, or a group of companies reorganises its internal receivables. Because release is a bilateral act of will, a unilateral statement by the debtor is never enough, and a release signed by a party without authority to represent the creditor creates a new dispute instead of closing the old one. For international debts the release document should therefore identify the exact claim released, the currency, the underlying contract and the law applicable to the release itself; ambiguity on any of these points is the most common reason released debts resurface.
Set-Off — Mutual Claims Netted Against Each Other
Article 442 of the Civil Code governs set-off: mutual claims existing between a debtor and a creditor may be extinguished by set-off, provided that the time for performance of those claims has fallen due. Set-off works as an accounting operation between opposing claims — each claim is applied against the other up to the amount they cover, and the obligation is extinguished to that extent, without any money changing hands.
In international commercial relationships this is a disproportionately underused tool. Where the same counterparties run several contracts — supply of goods one way, services the other way — matured mutual claims can be netted, shrinking the dispute to the genuine balance. A debtor facing a collection attempt in Georgia should therefore always map its own matured claims against the asserted debt before responding. The Code also contains a specialised regime for financial-market participants: bilateral obligations arising from qualified financial contracts concluded within a set-off agreement may be performed by set-off and by close-out netting, which is regulated by the Georgian Law on Financial Collateral, Arrangements and Derivatives. That close-out mechanism exists for systemic stability reasons and its use requires professional advice.