Doing Business In: Greenland
Plesner AdvokatpartnerselskabView Firm Profile
1. A FEW FACTS
Greenland is the world’s largest island and is located between North America and the Arctic and Atlantic oceans. Greenland covers a total area of 2,166,086 square kilometres, of which 410,449 square kilometres are ice-free. Greenland has approximately 56,000 inhabitants, of whom 18,000 live in the capital Nuuk.
The country of Greenland is a part of the Kingdom of Denmark and Greenland’s official currency is the Danish krone (DKK). Greenland’s official language is Greenlandic, but Danish is also spoken by most citizens.
1.2 Legal system and international relations
1.2.1 Legal System
The legal system in Greenland is mostly based on Danish civil law, primarily relying on statutes and regulations which are supported by preparatory works and case law. The judiciary of Greenland is part of the Danish system, however, Greenland has its own courts of law in Greenland. Their judgements are subject to appeal to courts in Copenhagen, Denmark.
Greenland was a Danish colony until 1953. Following an amendment to the Constitution in 1953, Greenland at the constitutional level became an integral part of the Kingdom of Denmark.
In 2009, the Self-Government Act established the Greenlandic Self-Government in its current form, and it consists of a parliament, Inatsisartut, and a government, Naalakkersuisut. The Greenlandic Self-Government possesses the legislative and executive powers within the fields of competence called-in by Greenland.
A number of legal fields cannot be taken over by the Greenlandic Self-Government under the Self-Government Act. These include the constitutional matters, foreign policy, defence and security policy, citizenship, and monetary policy.
The Kingdom of Denmark holds sovereignty, comprising the entirety of Greenland’s territorial lands, waters and airspace. However, Greenland has the right to declare independence from Denmark, if the Greenlandic people so decides in a public referendum.
Greenland is legally unique in relation to land rights. Greenland operates with common ownership, and it is not possible to buy and sell land. Area allotments, which grant the rights for the specific land, are issued upon application to the local municipalities.
The area allotments are personal for the recipient, and assignment of the right of use shall be approved by the authorities. An area allotment is generally unlimited in time, but it can be granted on a fixed term.
1.2.2 International Matters
Under the Constitution, it is a prerogative of the Danish Government to act on behalf of the Kingdom of Denmark in international matters. In many cases, except for specific areas like human rights or counter-terrorism, Denmark joins international agreements independently, allowing Greenland to decide whether or not to adopt the agreement. Within the areas of competence of the Greenlandic Self-Government the Self-Government can negotiate and conclude international agreements with foreign states and international organisations, which relate solely to Greenland and fully concern the Greenlandic territory.
Greenland is not a member of the European Union. However, Greenland is affiliated with the EU as an overseas country and territory (“OCT”), giving Greenland the possibility to benefit from various opportunities for European collaboration, such as taking part in the EU’s horizontal programs and granting Greenland duty-free admission to the EU internal market.
Greenland, as an autonomous territory of Denmark, does not hold independent membership status of NATO. Nonetheless, since Denmark is a NATO member state, Greenland remains indirectly within NATO’s purview or defense via its constitutional ties to Denmark.
Bilateral Investment Treaties
The current Danish investment protection treaties, including bilateral investment treaties (BITs), do not cover Greenland. However, some BITs have a provision for territorial extension of the agreement, which gives the government of Greenland the option to join the existing Danish BITs. Currently, Greenland has not joined any of the existing Danish BITs.
Foreign Direct Investment
The European foreign direct investment screening framework (adopted in Denmark) does not extend to Greenland. However, investments made in Greenlandic companies may still be subject to permission requirements should foreign entities or third-country companies exert control or possess significant influence over such entities.
The New York Convention
The New York Convention applies to Greenland, meaning that arbitral awards issued in a state that is also a signatory to the convention may be enforced in Greenland.
Although Greenland is not an independent member of the International Labor Organization (ILO), the Danish membership means that regulation also indirectly applies to Greenland.
1.3 Claim of the northern seabed
It is disputed who has the right to the Arctic seabed from northern Greenland to the Russian 200-nautical-mile border at the Lomonosov ridge or plateau. So far, the Danish realm, Russia and Canada have claimed the right to utilize the resources in the seabed and subsoil near the North Pole. Ultimately, it is the UN Commission on the Law of the Sea that decides how the rights should be distributed.
Economic relations between Denmark and Greenland
Denmark contributes to Greenland’s budget through a yearly, so-called “block grant”. The block grant accounts for approx. 50% of the public income in Greenland. The areas of authority that are taken over by the Greenlandic Self-Government under the Self-Government Act are financed solely by the Greenlandic Self-Government.
Apart from the block grant and the Danish financing, there is no specific economic relationship between Denmark and Greenland, and the Greenlandic Self-Government decides on its own how the budget is to be financed and how budget deficits are to be handled.
State of the Market
In terms of employment, Greenland is currently in a boom and the capacity is close to full utilisation. By 2022, the number of registered unemployed persons had fallen below 1,000. Consequently, Greenland is experiencing an increasing need for foreign labour and resources. Persons without Danish or Nordic citizenship must obtain a permit from the Danish Agency for International Recruitment and Integration (SIRI).
Many of the companies that operate in Greenland make use of consultancy assistance from Denmark. Likewise, many Danish companies have branches or subsidiaries in Greenland.
National authorities have assessed in 2022 that the extent of money laundering is limited in Greenland, but the risk of corruptive behaviour as moderate. The authorities pay attention to cash circulation, as well as whistleblower reporting, media coverage, audit reporting or filings with public authorities.
2. BUSINESS CONDUCT IN GREENLAND
2.1 Operating a company in Greenland
In 2016, the Greenland Parliament decided that the Danish Companies Act should be implemented in Greenland. The Companies Act entered into force in Greenland on 1 July 2018. Specifically, the adaptation and adoption of the Danish Companies Act meant that Greenlandic companies were given the same conditions as Danish companies under the current Companies Act from 2010. However, certain parts of the Danish Companies Act that was not implemented in Greenland.
Double taxation treaties
Greenland has concluded several double taxation treaties, approximately half of which have a broad scope, while the other half concern more limited areas. These areas include aircrafts, boats and the raw materials sector. Greenland has entered into double taxation treaties with countries such as Canada, USA, Norway, Cayman Islands and others.
Control of mergers
The Competition Act of Greenland stipulates specific criteria pertaining to mergers. If the merger surpasses a designated threshold, it becomes mandatory to provide notification to the Competition Authorities of Greenland. The competition regulations in Greenland bear a striking resemblance to those of Denmark, with only minor alterations.
There are several options to consider when looking for financing business and projects in Greenland, including a few local financial institutions.
Further, the Danish Business Development Finance offers financing to businesses in Greenland. The Danish Business Development Finance can offer both loans, guarantees, and collateral, and also collaborates with Greenland Venture, which is self-governing.
In addition, it may also be an option for local entreprises to explore financing through Vestnordenfonden and Nordic Council of Ministers. Vestnordenfonden is an investment fund that focuses on supporting sustainable growth in the Nordic countries and can, therefore, be a good opportunity for businesses working with sustainable solutions.
Finally, the Danish state participates in financing significant projects in Greenland, e.g., the recent construction and expansion of Greenlandic airports and financing of hydroelectric plants.
Greenland has a mortgage credit system. The Greenlandic system is reminiscent of the Danish system. The system enables real estate financing through mortgage credit. Mortgage credit is generally available in the larger towns of Nuuk, Sisimiut, Ilulissat and Qaqortoq. Greenland has its own Registration Court. The registry, which is a subdivision to the Court of Greenland, deals with the public registration of rights relating to real estate etc.
3. SECTORS AND PROJECTS
3.1 Current projects in Greenland
There are currently several large projects underway in Greenland that will affect the country’s economy, infrastructure and development in a positive way. Firstly, Greenland’s airport projects should be highlighted. Two airports in Nuuk and Ilulissat are expanded, while a new airport is constructed in Qaqortoq. Other significant projects include the establishment of two modern waste incineration plants in Sisimiut and Nuuk, construction of a sand harbor in Nuuk, hotel and road development projects, as well as various mineral projects. Finally, there are several large projects in the pipeline. Among other things, there are intentions for the expansion of Sikuki Nuuk Harbor as well as construction and expansion of hydroelectric plants.
The mining and mineral industry plays a central and important role for Greenland, despite the current modest activity in the industry. At the time of writing, there are seven active exploitation licences, of which only two mines have been commenced.
The industry has recently been subject to particular political attention, resulting in legislation whereby it has become illegal to conduct exploration and exploitation of uranium as well as other minerals with an average uranium content above 100 grams per ton. Despite of the political attention, there remains a political support of the mining industry to play a significant role in and contribute to boosting Greenland’s economy in the future.
With the implementation of the Self-Government Act in 2009, Greenland took over the mineral resources area with the Mineral Resources Act, giving the Self-Government the ownership implying the right to dispose and exploit the mineral resources in the underground. The Greenlandic Government thus has the right to administer and control the mineral resources, including issuing licences in this regard.
It is required to have the necessary licences to carry out mining activities in Greenland. A licence is required prior to prospecting, exploration and exploitation of the minerals. The three types of licences contain different terms.
Prospecting licences are non-exclusive. The non-exclusivity makes it possible for other parties to obtain a similar licence for the same area. Prospecting licences are issued for a period of five years and last until the end of the period or until a licence with an exclusive right to the area and minerals in question has been issued. A prospecting licence shall not confer on the licensee any right of first refusal in respect of an exploration licence. The prospecting licence does not entail any obligations on the licensee to conduct exploration commitments.
Exploration licences are exclusive. They grant the licensee an exclusive right to the area. However, permanent residents are still allowed to carry out non-commercial collection of loose minerals in the licence area. Exploration licences are issued for a period of five years, with the opportunity to extend the term for an additional five years. Thereafter, additional extensions of three years may be granted to the licensee, provided that the licensee has complied with the terms of the licence.
The licensee is required to spend a fixed minimum amount of exploration expenditure per calendar year. In addition, a licence fee is payable from the sixth year of the licence term. Certain obligations are imposed upon the licensee when the licence expire, and the licensee leaves the area.
Mineral findings entitle granting of an exploitation licence, if the licensee has otherwise complied with the terms of the exploration licence. However, under certain circumstances, the granting of the licence is subject to an environmental and social sustainability impact assessment, which subsequently is subject to a public hearing and approval by the Mineral Resources Authority.
The exploitation licence is valid for an initial period of 30 years, but it may be extended by the authority for up to 50 years. Before exploitation can commence, the licensee must submit a completion plan that is approved by the Mineral Resources Authority.
The licence will specify to what extend the licensee shall use Greenlandic labour and Greenlandic companies for contracting, supplies and services. This requirement applies to both exploration and exploitation licences. However, other companies and foreign labour may also be used.
Any public and private limited company based in or outside Greenland can obtain an exploitation licence. However, exploitation licences will usually only be issued to limited companies domiciled in Greenland and to companies which conduct business exclusively under licences issued pursuant to the Mineral Resources Act. Finally, it is a condition that the licensee has the necessary knowledge and financial background in relation to exploitation activities.
An export permit is required when exporting stone or minerals out of Greenland.
The granting of a licence itself is subject to fees, royalties and reimbursement of costs incurred by the Mineral Resources Authority. The taxation of the licensee is, in principle, governed by Greenlandic law.
The Arctic Command constitutes a joint command that bears the responsibility of overseeing the Defense’s assignments in and around Greenland. As part of this mandate, the Arctic Command oversees the defense of Greenland, as well as the inspection of fisheries, the monitoring of environmental concerns, pollution control, hydrographic surveying, and various other responsibilities.
Over the past few years, there have been discussions about additional investments in defense and defense-related facilities in Greenland. In addition, there is American presence in Greenland.
Greenlandic construction is growing, and as Greenland becomes more accessible to the outside world, there will be a need for more hotels, housing, and other projects of relevance. In addition, Greenland is experiencing increasing urbanisation with Greenlanders moving from the settlements to the larger towns.
There are various practical as well as legal issues that investors should bear in mind wanting to invest in the building and construction sector. The natural conditions in Greenland may complicate construction projects. Delays easier occur as a result of materials, etc. not arriving on time due to challenging environmental and weather conditions. Longer delivery times could entail delays for projects on the mainland. Specific weather conditions may also cause delays if work cannot be carried out at for a shorter or longer period.
Greenland operates with AP95, an agreed document, which constitutes the common terms and conditions for works and deliveries for building and construction activities in Greenland. The standard terms and conditions are based on the Danish standard terms and conditions, AB92. For turnkey contracts and professional services agreements, the Danish codes ABT93 and ABR89 are typically applied.
Infrastructure plays an important role for Greenland. The infrastructure is currently undergoing major development, and several projects are underway aimed at expanding and rationalising the infrastructure. Since 2019, investments in infrastructure have amounted to around 30-35% of Greenland’s GDP with a major weight on the building and construction sector.
3.5.1 Infrastructure on land
The infrastructure on land is predominantly road-based. However, the road network is not substantially developed and roads connecting the cities are limited. Road projects are currently underway to expand the road network and facilitate inter-city transport. As a result of Greenland’s natural conditions, it is difficult to construct and maintain paved roads due to the movement of permafrost and the underground.
Shipping is of great importance to Greenland. Firstly, virtually all of Greenland’s exports and imports are carried out by sea. Secondly, cruising is a central part of tourism. The Danish Maritime Act (“Søloven”) applies in Greenland, and consolidated acts concerning safe navigation of ships also applies, e.g., a compulsory pilotage for larger ships applies. The International Maritime Organisation also issued a mandatory Polar Code, which entered into force in 2017. The Polar Code sets requirements for ship design, equipment, voyage planning and crew education and training, among other things.
In 2015, the Greenlandic Parliament decided to build a new airport in Qaqortoq and to expand two existing airports in Nuuk and Ilulissat. On this basis, the Government of Greenland established an autonomous company (Kalaallit Airports A/S) with the purpose of managing the construction and operation of the new airports. The expansion of the airports in Nuuk and Ilulissat is expected to be completed by the end of 2024, while the airport in Qaqortoq is expected to be completed in 2025.
The majority of passenger transport to and from Greenland is by air. Two airline companies offer scheduled routes to Greenland. It is currently possible to travel by air to Greenland from Copenhagen and Iceland, but more connections are expected in the future.
The improved aviation infrastructure is expected to imply opportunities within tourism, exports and general economic growth in Greenland. At the same time, a substantial need to invest in elements that support tourism, i.e., hotels, adventure, restaurants, as well as everyday necessities for employees, including housing, institutions, groceries, etc., may occur as a result of Greenland’s improved accessibility.
3.6 Energy supply
In 2021, the Greenlandic government decided that Greenland shall join the 2015 Paris Agreement. At the same time, the Greenlandic government indicated a desire to be known for its efforts in renewable energy and a desire to be an exporter of renewable energy. This underlined Greenland’s ambitious plans for its energy sector. One of the objectives is that the public electricity and heating network will provide 100% green energy by 2030. Currently, only 17.5% of Greenland’s actual energy consumption is covered by renewable energy, while the remaining part is covered by oil.
3.6.1 Hydroelectric power
As a primary renewable energy source, hydroelectric plays a significant role in Greenland’s energy supply. It desired and planned that hydropower will play an even greater role in Greenland’s energy supply and production in the future.
3.6.2 Oil and gas
Oil continues to play an important role in Greenland’s energy supply with the transport sector in particular accounting for a large share of the consumption. However, due to the environmental impact of extraction and exploration, the Greenlandic government decided to suspend oil and gas exploration in 2021.
Fishery and fishing-related industry and trade is one of the most important industries in Greenland. The fishery is dominated by two players, the self-government owned Royal Greenland and the privately owned Polar Seafood. Greenland has bi- and trilateral fishery agreements with the Faroe Islands, Norway, Russia and Iceland, as well as a general fishing agreement with the European Union. Greenland has the authority in the area of fishery, and the fishery is regulated through quotas and licences, which are set and granted by the Government of Greenland.
To maintain an economically and biologically sustainable fishery, fishing quotas and total allowable catch limits are set annually. The annual total allowable catch (TAC) for each fish stock in the Greenlandic exclusive economic zone is set by the Greenlandic Government based on biological advice. The size and distribution of the fish quotas are also determined by the Greenland Government following advice from the Greenland Institute of Natural Resources. The conditions for the distribution of the quotas are laid down in the Consolidated Act on Licences and Quotas for Fishing.
Amerika Plads 37, DK2100 Copenhagen
Plesner Greenland desk:
Niklas Korsgaard Christensen