From the iceberg-filled bay, the mountains above the town of Narsaq, in south-west Greenland, appear unremarkable. In the September warmth, clumps of grass cling to the smooth, grey peaks shaped over centuries by an enormous ice cap that lurks behind the fjords on the horizon.
Brightly coloured homes are scattered around the shoreline below, home to a community of just over 1,300 people. Were it not for a mining outhouse on the edge of town, there would be little indication of the potential riches in the rock.
The range is home to one of the largest undeveloped deposits of rare-earth minerals and uranium in the world: the Kvanefjeld site, or Kuannersuit in Greenlandic. It contains high concentrations of metals such as terbium and neodymium, which are used to manufacture permanent magnets in wind turbines and electric cars. Every major power in the world is scrambling to get access to these minerals for carbon-free energy and transport.
A proposed open-pit mine would be worth about $7.5bn (£6bn) if it went ahead, according to the site operator, generating income for the island’s economy.
But when the mining company acquired the site in 2007, the impact of potentially radioactive waste contaminating drinking water and nearby sheep farms alarmed local people. They feared that the “tailings” – a slurry of ground-up waste from mining – would be laced with radioactive waste and could contaminate waterways or spread as dust in the air.
Greenland has a troubled history with mining pollution: the sites of lead and zinc mines developed in the 1970s remain polluted more than 50 years later, with fish, mussels and seaweed still testing positive for toxins. The ecosystem surrounding Narsaq is rich with seals, whales and other marine life, which Inuit hunter-gatherers rely on for their livelihoods.
In 2021, Greenland went to the polls, in a contest to which uranium was so central, international media dubbed it “the mining election”. The people voted in a green, leftwing government, led by the Inuit Ataqatigiit party, which campaigned against uranium mining due to the potential pollution.
When it took power, the new government kept its campaign promise, passing legislation to ban uranium mining. While not primarily a uranium mine, the Kvanefjeld project would require unearthing the radioactive substance to extract its rare earth oxides, putting it in violation of the law.
Many Greenlanders celebrated the vote as a victory for health and the environment. But three years later, the company is suing Greenland for stopping its plans, demanding the right to exploit the deposit or receive compensation of up to $11.5bn: nearly 10 times the country’s 8.5bn krone (£950m) annual budget.
Kvanefjeld’s operator, Energy Transition Minerals (ETM), the Australian-listed company formerly known as Greenland Minerals, argues that the decision to ban mining amounts to expropriation by Greenland’s government and any environmental concerns would be addressed with the “best environmental practice, where this was technically, practically and financially possible”.
It has taken the case to arbitration through the investor-state dispute settlement (ISDS), a once-obscure provision in trade agreements that has become a lucrative area of international law, alongside cases in Greenland and Denmark.
ISDS was designed to protect foreign businesses from state corruption and theft, but it is increasingly being used to sue governments that bring in environmental laws to meet climate targets or protect biodiversity and the environment. A Guardian investigation into ISDS, which analysed more than 1,400 cases, has revealed $84bn in payouts from governments to fossil fuel companies. More than $120bn of public money has been awarded to private investors across all industries since 1976.
Quick Guide
What is ISDS and how does it work?
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What is it?
Investor-state dispute settlement (ISDS) was created to help companies protect investments abroad. It allows companies to sue countries for lost profits caused by government action including corruption, seizure of assets or the introduction of health and environmental policies.
The system was created in the 1960s by the World Bank. It was intended to give companies confidence to invest in poorer countries with weak political systems where they might not get a fair hearing in domestic courts.
How does it work?
The foreign company must put forward a case showing that the state has damaged its profits. Most international investment treaties and free-trade deals include ISDS clauses. Cases are heard by a private arbitration tribunal, and typically decided by a panel of three arbitrators – one chosen by the company, one chosen by the state and the third selected jointly.
How much are the cases worth?
Awards regularly amount to hundreds of millions of dollars, and some are in the billions. In 2024 the average amount awarded was $385m (£304m). The average sum awarded is increasing and these payouts can make up a sizeable chunk of poorer countries’ annual budgets.
Who is involved?
The fossil fuel and mining industries are the most litigious in the ISDS system, accounting for more than 30% of known cases.
Most claims are brought by companies based in rich countries against the governments of developing countries. Companies registered in developed countries file 81% of ISDS lawsuits, according to UN data, while developing countries have faced 62% of cases.
How common is it?
ISDS began as an obscure legal mechanism, averaging about one case a year for its first decade. Now, dozens are brought every year, with Guardian analysis finding more than 900 since 2013.
Often, companies in such cases sue for vast sums – claiming not only the costs of planning or exploration, but also for all the future profits they expected to make from a cancelled project. In the Greenland case, ETM, which is partly owned by the Chinese government-backed Shenghe Resources, said it had spent more than $100m developing the site in the expectation it would be allowed to operate it as a mine. Its $11.5bn claim is based on the $7.5bn value of the mine plus $4bn in interest.
‘They try to bully us and make us feel small’
“For us, it’s a principle of governments deciding power,” says Naaja Nathanielsen, Greenland’s mining minister, who also has business, trade, justice and gender equality in her portfolio. “We were elected democratically. We had a public hearing process with the law. It offends me that they are trying the case in this way.
“It really challenges the democratic institutions,” Nathanielsen says. “We are going to fight until the end because it’s a matter of principle.” She refuses to say what losing the case might mean for Greenland.
Daniel Mamadou-Blanco, managing director of ETM, says his company understands how democracies work. “We were asked to apply for a mining licence, which we did. In the process, we raised the necessary capital to move to the next step,” he says.
“Then there is a change of government – which is democratically elected – which has made a promise to specifically stop this project for political reasons. That’s absolutely fine but, in this case, that’s an expropriation. If it’s an expropriation, we are entitled to compensation,” he says.
Greenland’s government is keen to develop a mining industry that will sustain its future independence without critically damaging its environment. Currently, the country relies on Denmark for about half of its annual budget.
While there is just one active mine, the island is being prospected by many of the world’s largest companies, including one linked to Bill Gates and Jeff Bezos. Southern Greenland has become a new frontier of global mining, with at least 124 projects at various stages of development across the island. It has also become the latest site of the growing economic confrontation between the US and China, with Donald Trump repeatedly threatening to annex Greenland.
Despite the intense global interest, Greenland’s government says it will not be moved in the case of the Narsaq deposit.
“They try to bully us and make us feel small. That’s not going to happen,” Nathanielsen says. “Energy Transition Minerals don’t have that kind of money [to bring the case themselves]. They would not have been able to succeed without [outside] support, which makes their argument even more pitiful.”
Mamadou-Blanco disagrees. “We are just a small company. I would argue that here, the bullies are the government and not us,” he says.
The mining company is not paying its own legal fees, although it insists it would have been capable of bringing the case on its own. Burford Capital, a London- and New York-listed litigation finance specialist, has invested in the case, covering the cost of the arbitration proceedings in exchange for a share of the financial benefits if it is successful.
It is among 75 cases found by the Guardian that have been financed by litigation finance investors – a trend that has grown dramatically since the system began. Other examples include a US-based deep-sea exploration company called Odyssey Marine Exploration, which won a payout of $37.1m from the Mexican state after it was denied an environmental permit to mine a large area of seabed off the coast.
In 2015, Italy banned offshore oil and gas exploration within 12 miles of its coastline on environmental grounds. Rockhopper, a UK-based oil and gas company, had to dismantle operations on its Ombrina Mare oilfield and was awarded €190m (£159m), plus interest, of Italian public money in compensation for lost future profits. Italy is still trying to get the decision annulled. No payment has yet been made.
For proponents of the system, the rise of no-win, no-fee investment in arbitration helps more companies access justice than would do otherwise, protecting them from bad behaviour by states. But others fear that a new asset class has been created which profits from laws designed to mitigate the climate crisis and environmental damage.
Malcolm Langford, a professor of public law at the University of Oslo, says it pits two wings of the environmental movement against each other: investors eager to extract rare earths for the green transition vying with traditional concerns about hazardous industries.
“The amount of potential damages is a wild card,” he says. “The claim by the investors [ETM] is not so far-fetched, given that some tribunals have awarded astronomically high damages for mining and similar projects. It is clear though that the billion-dollar claim in this case is designed to push Greenlanders to change their mind and allow mining to start.”
Kyla Tienhaara, an associate professor at Queen’s University in Canada, says that although a rapid transition to clean energy is needed, local communities and governments should still have the right to reject mining projects that threaten ecosystems or create unacceptable risks to human health and wellbeing.
“Time and time again, what we see around the world is that when extractive projects are rejected on these grounds, investors turn to arbitration with exorbitant compensation claims,” she says. “Even the threat of such a claim can cause governments to reverse course.”
A high-stakes business
In February, representatives from the Perth-based ETM travelled to Greenland to visit the island once again. The arbitration case, launched in 2022, has proceeded slowly due to lengthy disagreements about procedure. This summer, arbitrators will decide whether they should accept the case. If they do, the issue is likely to be resolved later this year.
After the 2021 general election, the value of the mining company collapsed. But now, investor optimism is changing. After Trump’s comments about Greenland, the company’s share price has surged – more than quadrupling since November. Greenlanders go to the polls again this month, and a new government could allow mining to go ahead. The company has raised more capital, following the bounce in its share price.
Outside a slaughterhouse in Narsaq, a group of men dressed in blue overalls smoke as they wait for the first seasonal shipment of Greenlandic sheep to arrive. The bay is largely silent after a day of drizzle, which caused loud booms all night as icebergs broke apart. Finally, a boat comes into view in the fjord and everyone scrambles to unload the shipment.
There is a range of opinion about the mine in Narsaq, says Kitdlak Lynge, a production management assistant at the slaughterhouse, as we wait.
“People are divided into two different groups because of the uranium,” he says. “I am not worried about whether the mine happens, I am worried about how. The plans I have seen are not acceptable. It’s going to destroy the water.”
Dozens of thick-coated sheep scramble towards the abattoir from the harbour. Within weeks, the bay behind them will fill with pack ice as the cold sets in, sometimes cutting Narsaq off from the world for days. The arrival of fat seal pups lying on the ice will signal the start of spring and the return of the light. Farther around the coast, polar bears will feast on the seals as the region bursts into life once again. Nobody knows what an open-pit mine would mean for any of that.
“The chemicals and the tailings that they’re going to use, I do not want them to be left here,” says Lynge. “If they could ship them outside of Greenland, I wouldn’t mind. [But] it will affect the whole area if mining starts – the chemicals, the industry and the changes in the environment will affect the whole area.”
