Mining, sovereignty and the environment: The high-stakes arbitration in Greenland

The arbitration case involving Greenland Minerals (GM), a subsidiary of Energy Transition Minerals (ETM), and the governments of Greenland and Denmark, touches on a range of issues related to resource extraction, environmental protection and the complex interplay between commercial rights and government regulations. Here’s a breakdown of the key points:

Background of the dispute

1. Arbitration initiation:
   • On 19 July 2023, GM initiated arbitration against Greenland and Denmark, seeking either confirmation of its mining rights or $11.5 billion in compensation.
   • This follows Greenland’s 2021 ban on uranium extraction, which affected GM’s mining plans in the Kvanefjeld area.
2. Kvanefjeld project:
   • Kvanefjeld, in southern Greenland, is rich in rare earth elements and uranium.
   • These minerals are crucial for technologies like wind turbines and electric vehicles, making them highly valuable for the green energy transition.
3. Political and environmental context:
   • Greenland, a self-governing territory within Denmark, holds significant autonomy, including control over its mineral resources.
   • The 2021 Greenlandic election, influenced by environmental concerns, led to the election of a government opposed to uranium mining, resulting in the Uranium Act.

Legal and regulatory framework

1. Licensing issues:
   • GM’s original exploration licence was granted in 2007, with an addendum in 2011 supposedly giving the government discretion over mining applications.
   • The Uranium Act, passed in 2021, introduced a ban on uranium prospecting and mining, impacting GM’s project.
2. Arbitration claims:
   • GM argues that its exploration licence should automatically transition to an exploitation licence.
   • The company challenges the applicability of the Uranium Act to its rights and claims that its legitimate expectations have been breached.
3. Legal basis:
   • GM’s claims invoke Danish arbitration law and reference international investment law, despite no specific bilateral treaty with Denmark being invoked.

Implications and broader context

1. Investor-state disputes:
   • The case highlights the tension between safeguarding investor rights and respecting state sovereignty to regulate for environmental protection.
   • Similar cases globally often involve disputes over changes in policies that impact investments in resource extraction.
2. Future conflicts over transition minerals:
   • The demand for transition minerals is expected to grow, potentially leading to more disputes like this one.
   • Countries, including Greenland and EU members, face the challenge of balancing economic development with environmental protection and local opposition.

Lessons and considerations

1. Policy and legal frameworks:
   • Effective and balanced policies are crucial to avoid disputes and ensure sustainable resource management.
   • Governments need to have robust frameworks and sufficient resources to manage large-scale projects and address public concerns.
2. Environmental and social safeguards:
   • Adequate environmental and social safeguards are essential to prevent conflicts and ensure sustainable development.
   • Public administrations must be equipped to monitor and regulate the impact of such projects comprehensively.

Conclusion

This dispute serves as a cautionary example of the complexities and challenges associated with the extraction of transition minerals in sensitive environments. It underscores the need for a careful balance between economic development, environmental protection and the rights and expectations of local communities and investors. The outcome of this arbitration could set a significant precedent for future conflicts over resource extraction and regulatory changes.