(19 Dec. 1187–late Mar. (28?) 1191)
Two days after the death of Gregory VIII the cardinals at Pisa, after their first choice, Teobaldo of Ostia, had declined office, elected Paolo Scolari, since Dec. 1180 cardinal bishop of Praeneste (now Palestrina). Alexander III had made him cardinal deacon of SS Sergio and Bacco and later cardinal priest of Sta Pudenziana. A wealthy, but not noble, Roman, related to influential families in the city, he had been brought up in Sta Maria Maggiore, in 1176 becoming its subdeacon and later its archpriest. Weak in health (he was too sick to take part in the election), without experience of political missions, he was nevertheless able, though at a heavy price, both to arrange the return of the papacy to Rome, from which hostility to the commune in control there had kept it exiled for six years, and to complete the reconciliation between church and empire which Gregory had successfully started. In achieving these ends he was helped by Leone de Monumento, a confidant of Emperor Frederick I (1152–90) as well as a Roman senator, who was present, and very possibly had influence, at his election.
After discussions with the commune he was triumphantly received in the city in mid-Feb. 1188 and thenceforth resided in the Lateran, in which neither of his predecessors had set foot. Under a compact signed on 31 May the senators recognized the pope's sovereignty, agreed to swear allegiance, and restored the papal revenues and right to coinage; but in return he had to make substantial payments, annual and on special occasions, leave the administration largely to them, and abandon their hated neighbour Tusculum to their tender mercies. Clement undertook to destroy the ramparts of Tusculum, something he failed to do. The accord he reached with the empire was sealed by the treaty of Strasbourg of 3 Apr. 1189. A vexatious dispute over the see of Trier was solved by discarding the rival candidates and accepting the emperor's proposal of a fresh election. The papal state, occupied by Frederick's son Henry (Emperor Henry VI: 1191–7) in 1186 as a reprisal against Urban III, was restored to the holy see, the empire, however, expressly reserving proprietary rights over it. In return Clement undertook to give the imperial crown to Henry. It is not known what, if any, agreement was reached about the Matildine lands; it is likely that they remained in the emperor's hands without any formal decision about ownership.
Both settlements entailed the surrender of vital positions by the holy see, which in part accepted them because of its desperate financial straits; it is significant that, once established in Rome, Clement instituted an exacting financial regimen, appointing Cencio Savelli (later Honorius III) as treasurer. An even more compelling motive was the Third Crusade (1189–91), announced by Gregory and now getting under way, for its success depended on an understanding with the empire. Its organization and leadership lay with the secular princes, above all with Frederick, but Clement devoted all his efforts to promoting it. One of his first acts was to complete the negotiations begun by Gregory VIII for restoring peace between Pisa and Genoa, whose cooperation as sea powers was necessary. Following Gregory, too, he sent legates throughout Europe, not only to preach the crusade but also to foster the harmony between nations which he considered indispensable to ‘the Christian republic’ in the hour of crisis. As a result, despite its weakness vis-à-vis the empire, he made the papacy a centre of unification and coordination.