Member Article

It has long been known that Greenland possesses vast amounts of mineral resources. But due to climate changes, resulting in a rapid meltdown of ice caps in the Arctic regions, it is now getting easier to discover and exploit the mineral resources. The costs of exploring and exploiting minerals continue to decrease, and many experts believe that Greenland will become the next frontier within the mining industry.

Greenland has been part of the Kingdom of Denmark for centuries, but is today an autonomous and self-governing country in all matters except for foreign affairs and defence matters, which are still under Danish control. The Government of Greenland believes that revenues from mineral resources are important to Greenland's future, and the Government is generally perceived to have a welcoming attitude towards international mining companies and other foreign investors.

Arbitration in the mining industry

In this article we will look into how arbitration is and can be used by international mining companies and other investors when exploring and mining in Greenland.

Although investors in Greenland benefit from a politically stable and investor-friendly climate, arbitration is in our opinion the preferred choice for resolving most commercial disputes in Greenland. For a discussion of the advantages and disadvantages of arbitration over judicial proceedings, we refer to other literature on the matter. It is not the topic of this article. However, we would like to mention that the possibility to appoint experienced arbitrators with industry knowledge and the non-public nature of the arbitration proceedings are some of the advantages of choosing arbitration.

As in many other jurisdictions, a license from the authorities is required to explore and exploit mineral resources in Greenland. Such licenses are administered by the Bureau of Minerals and Petroleum (BMP) in accordance with the Mineral Resources Act of 7 December 2009.

According to section 90 of the Mineral Resources Act,

"A license may stipulate that a dispute between the Greenland Government and the licensee as to whether the terms of a licence have been complied with must be brought before a court of arbitration whose decision will be final."

Although the wording of section 90 may leave another impression, arbitration is not used as a means to solve all disputes between the Government of Greenland and the licensee regarding the license. Decisions, which according to the stipulations of the license depend on the judgment or resolve of the authorities, are not subject to arbitration, but such administrative decisions can be reviewed by the ordinary courts in accordance with section 63 of the Kingdom of Denmark's Constitution. This is expressly stated in the standard terms that form the basis of licenses issued by BMP.

These standard terms also contain an arbitration agreement, including a procedure for appointing an ad hoc arbitration tribunal (Standard Terms for Prospecting Licenses for Minerals, section 19, and Standard Terms for Exploration Licenses for Minerals, section 20). According to the standard terms:

• the place of arbitration shall be Copenhagen,
• Danish law shall be applied,
• the arbitration tribunal shall consist of three arbitrators,
• the Government of Greenland and the licensee each appoint one arbitrator and they jointly appoint the chairman of the arbitration tribunal,
• the Chief Justice of the Danish Supreme Court will appoint the chairman if the parties cannot reach an agreement on the choice of chairman,
• the arbitration tribunal makes its decision by a majority of votes, and
• the arbitration tribunal will lay down its own rules of procedure.

Investors may prefer another place of arbitration or another method of electing the chairman, bearing in mind that arbitration in Denmark and a Danish chairman elected by the Chief Justice of the Danish Supreme Court could be considered as "home field" advantages for the Government of Greenland - although Danish judges are known to be fair and honourable.

On the other hand, there will most likely be no need for expert witness statements about Danish law.

One way of creating a more level playing field and at the same time saving costs is to agree on English as the language of the arbitration. The Standard Terms are silent on this matter, which means that Danish will most likely be the language of the arbitration, even if the license and all correspondence between the parties have been in English. If so, the language will be English in the Danish Arbitration Institute, whereas Danish will be the language before the Danish Construction Arbitration Board.

Thus, it is important to pay attention to and negotiate the details of the arbitration procedure, because the wrong institute, the wrong language or the wrong seat can be a costly and time-consuming matter.

Sometimes it is also seen that Joint Venture partners or back-to-back contractors let their legal relationship be subject to the laws and arbitration in a third country, despite of a different set-up vis-à-vis the Danish/Greenlandic authorities. One should consider carefully whether this situation is efficient or contains a build-in extra risk and cost.

Greenland

Greenland is an autonomous country within the Kingdom of Denmark (i.e. Denmark, The Faroe Islands and Greenland). Greenland is subject to the Constitutional Act of the Kingdom of Denmark but has had self-government since 2009 meaning that Greenland controls most legislative areas, including the regulation of natural resources.

Due to the findings already made, as well as expected future discoveries of mineral deposits, the mineral industry is likely to become the most important industry in Greenland. The following mineral deposits are already found or expected to be found: rare earth elements, aluminium, coal, oil, natural gas, platinum, gold, silver, lead, copper, ruby, nickel, zinc and many more.

Several laws regulate the area - most importantly the Mineral Resource Act and the Large Scale Project Act. Exploration licenses for hydrocarbons and minerals in Greenland are subject to the laws of both Greenland and Denmark. Disputes arising between the Greenland Government and the licensee will in some cases be reviewed by the Danish courts and in other cases be subject to an arbitration tribunal seated in Copenhagen. The arbitration tribunal will apply Danish law when making its award.

 

Link to article