Member Article

On 26 November 2013 the Danish Government and the Government of Greenland handed over their scientific documentation for sovereignty over the continental shelf northeast of Greenland to the Commission on the Limits of the Continental Shelf (CLCS) and thereby submitted a claim for an area of approximately 62,000 square kilometres off the Greenlandic north coast between Greenland and Svalbard (Norway).

The documentation has been collected for long time in collaboration with Canada and Sweden to document that the Lomonosov Ridge running from the north of Greenland past the North Pole and to the Russian Continental Shelf is a natural prolongation of the Greenlandic Continental Shelf.

If this is the case, the Danish Realm (Denmark, Greenland and the Faroe Islands) may to some extent claim sovereignty over the seabed of the large area of 62,000 square kilometres between Greenland and the North Pole and exercise sovereign rights over the area for the purpose of exploring it and extracting its natural resources. In fact, lawyers in Plesner Law Firm directed attention to this fact in published legal articles already in 1991.

However, Canada has on 6 December 2013 submitted a partial submission for the continental shelf in the Atlantic Ocean and intents to submit scientific documentation for the continental shelf in the Arctic Ocean and Russia is expected the submit a similar claim.

The increasing interest of the five Arctic coastal states (Canada, Russia, Norway, USA and Denmark) in the possibilities of obtaining sovereignty over the Arctic is not limited to the exploitation of its natural resources, but it is also a question of the jurisdiction over the new Arctic shipping routes that have become viable during recent years due to the increased melting of the polar ice caps. These new shipping routes can make the extraction of natural resources in the Arctic even more profitable.

The question of jurisdiction over the Arctic waters and the new shipping routes is already resulting in global conflicts, for instance illustrated by the "Arctic Sunrise" case between the Netherlands and Russia before the International Tribunal for the Law of the Sea in Hamburg (ITLOS).

Operating in the Arctic therefore involves several practical and legal issues, which must be carefully examined and clarified before investing in the great possibilities of the Arctic seabed and the new polar shipping routes.

Exclusive economic zone

The Arctic covers an area of about 14.5 million square kilometres and the Arctic States are all working to expand their territorial rights in the North.

In recent years it has become well-known that the mineral potential in the Arctic is great. The US Geological Survey (USGS) estimates that 13 per cent of the world's conventional oil resources and 30 per cent of the world's conventional natural gas resources are located in the Arctic. In addition, significant mineral deposits are also found in the Arctic. Although such estimates are always uncertain, the USGS estimates that 1/4 of the world's remaining energy resources are in the Arctic. The exploration and extraction of the natural resources in the Arctic are becoming increasingly interesting due to technical improvements and the general increase in world prices, making extraction in the Arctic more profitable.

Although operating with drilling equipment and commercial shipping in the Arctic also involve great risks, it is estimated that USD 100 billion will be invested in exploration and extraction of oil and gas in the Arctic over the next 10 years. In addition, significant investments in exploration and extraction of mineral resources have been and will be made in the future.

The exclusive economic zone extends 200 nautical miles from the States' coastline. Within this area the States have exclusive right to exploit the natural resources of the sea and the seabed, subsoil and any other economic exploitation.

Article 76 of the United Nations Convention on the Law of the Sea (UNCLOS) however, makes it possible to expand these exclusive rights if the States document that their continental shelf extends beyond 200 nautical miles which is the so-called outer limit of the continental shelf, which must not exceed 350 nautical miles from the shorelines of the State in question. Documentation for such expansions must be submitted to the CLCS no later than 10 years after the submitting State has ratified the UNCLOS. Experts of the CLCS will then consider the scientific evidence submitted by the coastal states. However, it is ultimately up to the individual countries to negotiate the final delimitation.

Apart from the documentation submitted on 26 November 2013, the Danish Realm has already under article 76 of the UNCLOS submitted similar documentation for the continental shelf north of the Faroe Islands (2009), the continental shelf south of the Faroe Islands (2010), and the continental shelf south of Greenland (2012) - a total area of more than 873,000 square kilometres.

Maritime transport of natural resources and jurisdiction

As the mining and drilling activities in and around Greenland and other Arctic regions are increasing, the regulation of shipping is of great importance.

The Northeast Passage is already viable for 4-5 months in the summer. In September 2010 a Danish shipping company completed the first commercial voyage through the Northeast Passage to China, carrying 41,000 tons of iron ore. The trip was thus reduced to 1/3 compared to the traditional voyage going through the busy Suez Canal saving the company USD 180,000 in fuel costs. In 2012 the Danish company conducted 46 voyages through the Northeast Passage and accounted as a result for 75 per cent of all voyages through the Northeast Passage.

At present, the Northwest Passage is navigable approximately every 7th summer but it is expected to be passable every second summer by 2050. The central Arctic route across the Arctic Ocean is not yet viable, but it is expected to become so gradually, so ships could sail through for four months of the year by 2050.

Large parts of the Northeast Passage and the Northwest Passage run through the Russian and Canadian territorial waters. As a result Russia and Canada have jurisdiction over these parts of the new shipping routes. However, foreign ships are according to the UNCLOS to some extent allowed the right of innocent passage through the outer-territorial waters.

Consequently, the Danish Realm has, together with the United States, Norway and several other countries in the International Maritime Organization, IMO, proposed to develop international mandatory safety and environmental protection rules for navigation in the Arctic, which is called the Polar Code. However, the dispute over the jurisdiction of the new Arctic shipping routes has prevented the adoption of the IMO Polar Code. Canada wishes control of the Northwest Passage along the north coast of North America and Russia wishes control of the Northeast Passage along the north coast of Russia. The United States wishes that the status of international transit routes be attributed to the routes and that they are regulated as international waters.

The IMO is working with a three-part categorization of ships operating in polar waters, based on vessels' hull strength and armor. Depending on the category, the vessels will be allowed to sail in icy waters or just sail in ice-free waters. If the IMO fails to reach consensus on common international rules, the Danish Realm will work for the implementation of non-discriminatory regional safety and environmental rules for navigation in the Arctic, in consultation with the other Arctic states and taking into account international law, including the Law of the Sea Convention provisions concerning navigation in icy waters.

The continuous interest in the exploitation of its natural resources in the Arctic region is also expressed in the Greenlandic parliament decision on 24 October 2013 to depart from its zero tolerance policy on extraction of uranium and other radioactive substances on Greenlandic territory and recently, the Danish shipping company Maersk Line announced that the company considers to carry Greenlandic uranium from a large mining project in Kvanefjeld to be developed by the Australian mining company Greenland Mining and Energy.

The Kvanefjeld project in southern Greenland is among the largest mining projects in the history of the country. However, it is still to be established whether the export of radioactive substances from Greenland is a matter for the Government of Greenland or for the Danish Realm. In addition, it must be examined whether Greenland may export uranium without violating the conventions and international treaties signed by Denmark.

As mentioned in the introduction, the ITLOS made on 22 November 2013 an award in part in the "Arctic Sunrise" case between the Netherlands and Russia. The dispute arises from the Russian arrest and detention of the vessel Arctic Sunrise owned by Greenpeace and sailing under the Dutch flag and the 30 crew members.

The arrest was made when the vessel entered the exclusive economic zone of Russia and a number of the crew members tried to board the floating oil rig Prirazlomnaya (Gazprom) in the Barents Sea north of the Russian coastline.

Despite Russian objections the Tribunal's partial award of 22 November 2013 established that the Tribunal has jurisdiction over the case because it concerns the interpretation and application of the UNCLOS.

The Tribunal ordered Russia to immediately release the vessel and crew members, upon the posting of a bond of EUR 3,600,000 in the form of a bank guarantee. Russia continues to refuse the Tribunal's jurisdiction, but has released the 30 crew members on bail after two month of imprisonment. In connection with the upcoming the Winter Olympic Games in Sochi the Russian Duma approved an amnesty law for the 30 Greenpeace crewmembers on 18 December 2013.

The "Arctic Sunrise" case display the great difficulties of operation in the Arctic and may lead to other and more commercial conflicts between the coastal states and other shipping nations.

Conclusion

The Danish Realm and the other Arctic states face major challenges in line with the increased potential for extraction of raw materials in the region. There is no doubt that the future regulation of navigation in the Arctic and controversies in granting jurisdiction over the various regions of the Arctic will have an impact on how profitable it will be to extract natural resources in the Arctic.

Despite the many risks and uncertainties in connection with operations in the Arctic region the future investments in exploration and extraction of oil, gas and mineral resources will be considerable and are only expected to increase further due to the general increase in world prices and the potential of the new shipping routes.

Similar challenges will arise with respect to the new shipping routes through the Arctic sea, where a number of coastal states wish control of the passages surrounding the North Pole at the expense of other shipping nations.

Even though the "Arctic Sunrise" case confirms that the ITLOS is competent to decide on questions of jurisdiction, there are several states, which have not yet ratified the UNCLOS, including the United States.

Greenland

Greenland is an autonomous country within the Kingdom of Denmark (ie, 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 can control 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.