Greenland Proposes Rules On Screening Of Foreign Direct Investments

The Government of Greenland has taken the first step towards adopting rules on screening of foreign direct investments. The rules will entail that a wide range of investments in companies domiciled in Greenland as well as the commencement of business activities in Greenland will require prior approval by the Government. This marks a significant development in Greenland's approach to foreign investments and will significantly alter the investment landscape in Greenland. Anyone with commercial interests in Greenland are advised to begin preparing for the new rules.

Background

In recent years, there has been growing concern that foreign direct investments may pose threats to national security and public order. The issue has attracted heightened political attention across jurisdictions and has led an increasing number of countries to adopt national rules on screening of foreign direct investments as a mean of preventing such investments from threatening national security and public order.

At present, Greenland has no rules in place for the screening of foreign direct investments and consequently, no legal mechanism to prevent such investments from posing a threat to national security or public order. However, due to the complex geopolitical environment in which Greenland operates, the Government of Greenland has deemed it appropriate to propose an Act on the screening of certain foreign investments in Greenland to prevent foreign investments from posing a threat to Greenland's national security and public order.

The following provides an overview of the types of investors and investments, etc. to which the Act will apply, together with the main elements of the screening regime and key aspects of the review process.

Covered types of investors

The Act will apply to investments made by foreign investors, i.e.:

• Individuals, who are not Danish citizens, or individuals, who are Danish citizens, but who have not had permanent residence or full tax liability in Greenland in the preceding five years.
• Companies domiciled outside of Greenland, or companies domiciled in Greenland, but which are subsidiaries or branches of companies domiciled outside of Greenland, or that are otherwise under control or significant influence of such companies domiciled outside of Greenland. Domicile refers to where the company is registered or has its statutory office.
• National authorities and governmental bodies from other countries than Greenland.

Covered types of investments

The Act will apply to a broad range of investments, i.e.:

• Acquisitions of ownership of, or control over, at least 25 percent of the shares or voting rights of an entity domiciled in Greenland.
• Acquisitions of ownership of, or control over, additional shares or voting rights of an entity domiciled in Greenland thereby increasing an existing ownership or controlling interest to exceed one third, 50 percent, two thirds or reach 100 percent.
• Obtaining decisive influence over decisions regarding managerial, financial, developmental, or operational matters in or on business-critical areas of an entity domiciled in Greenland by other means than the acquisition of shares or voting rights. This includes asset purchases, long-term loan agreements, leasing agreements, supplier and service agreements.
• Taking over or commencing other activities in Greenland that may pose a threat to national security or public order. This includes any economic activity, such as research and innovation collaborations, control and influence over real estate at critical locations, grants of permits for carrying out activities, etc.

The types of investments covered under the Act largely mirror those of the Danish Investment Screening Act covering acquisitions of shares and voting rights (though with a higher investment threshold compared to the Danish Investment Screening Act), as well as obtaining similar control by other means than the acquisition of shares and voting rights. However, the Act also extends to the takeover or commencement of other business activities that may pose a threat to Greenland's national security or public order, such as the granting of permits to carry out certain activities.

Mandatory authorisation for particularly sensitive sectors

The Act establishes a mandatory authorisation regime for investments in sectors considered particularly sensitive. This means that such investments cannot be completed without prior authorisation from the Government, even if the parties have assessed that the investment does not pose a threat to national security or public order.

The particularly sensitive sectors will include the following:

• Companies operating in the defence sector, i.e., companies engaged in developing or producing weapons, ammunition, or other military technologies.
• Companies active in IT security and the processing of classified information, i.e., companies engaged in developing, producing, or maintaining products with IT security functions, or providing services used for the processing of classified information.
• Companies manufacturing dual-use items, i.e., companies engaged in manufacturing products, including technologies, which may be used for both civilian and military purposes.
• Companies manufacturing other critical technology, i.e., companies engaged in manufacturing technologies other than military and dual-use items, such as AI, robotics, 3D printing, aerospace, energy storage, quantum, and nuclear technologies.
• Companies operating within critical infrastructure, i.e., companies essential to maintaining or restoring functions deemed critical to society, such as companies within energy (gas, electricity, oil, water), information and communications, transport, emergency preparedness and civil protection, critical raw materials, drinking water, finance and economy, research, meteorology, authority exercise in general, as well as cross-sectoral crisis management.
• Companies engaged in mineral resource activities, i.e., companies holding or requiring licences under the Greenlandic Mineral Resources Act or the Mineral Activities Act.
• Self-government-owned companies, i.e., companies in which the Self-Government directly or indirectly holds more than 50% of the ownership interests or voting rights.
• Commercial hydropower plants, i.e., hydropower plants that are not used for public supply.

The list of sectors also largely mirrors those of the Danish Investment Screening Act with the addition of three Greenland-specific areas, i.e., companies engaged in mineral resource activities, self-government-owned companies and commercial hydropower plants. This highlights Greenland's unique role as a nation rich in mineral resource and the strategic importance of publicly owned companies and commercial hydropower plants. The exact scope of the sectors remains to be determined by the Government in forthcoming executive orders.

Voluntary notification for all other sectors

For all sectors other than those deemed particularly sensitive, the Act provides for a voluntary notification of investments that may pose a threat to national security or public order. Thus, foreign investors may voluntarily submit a notification to the Government to clarify whether an investment is considered to pose a threat to national security or public order, thereby avoiding the risk of a subsequent unwinding order.

If an investment has not been notified under the voluntary notification regime, the Government may, within five years of completion of the investment, initiate an investigation to assess whether the investment poses a threat to national security or public order. If the investment is found to pose such threat, the Government may order the investment to be unwound.

Review process

Under both the mandatory authorisation regime and the voluntary notification regime, the application or notification must be submitted to the Government, which will assess whether the investment may pose a threat to national security or public order. Applications and notifications may be submitted in Greenlandic, Danish, or English.

If the Government assesses that an investment may pose a threat to national security or public order, it may impose conditions for its approval. Where such conditions are insufficient to mitigate the identified concerns, it may prohibit the investment altogether. The Government may also impose a temporary prohibition of an investment pending its review and determination that it does not pose a threat to national security or public order. Further, at the request of the foreign investor, it may grant a temporary approval of an investment where it does not expect the investment to pose such a threat.

If an investment covered by the mandatory authorisation regime is completed without prior approval, or if a foreign investor breaches the conditions imposed by the Government, the Government may order the investment to be unwound. If such an order is not complied with, the Government may request the Danish Business Authority to suspend the voting rights in the concerned Greenlandic company.

Next steps

The Act is currently under consideration by the Greenlandic Parliament, with expected final debates to take place in February 2026. Pursuant to the current draft, the Act is scheduled to enter into force on 1 January 2026 and will apply to foreign investments made after that date.

Plesner comments

The Act marks a significant development in Greenland's approach to foreign investments, thereby aligning with the international trend whereby an increasing number of countries have been adopting rules on screening of foreign direct investments as a mean of preventing such investments from threatening national security and public order.

The Act will significantly alter the investment landscape in Greenland and anyone with commercial interests in Greenland are therefore advised to begin preparing for the new rules and their implications. A broad range of investments, encompassing both the acquisition of ownership of and control over companies domiciled in Greenland, as well as the commencement of other activities in Greenland that may pose a threat to Greenland's national security or public order, will require prior approval.

This will add complexity in transactions. It will affect the planning phase, where it will be necessary to assess whether an investment will require mandatory approval or whether a voluntary notification is appropriate. It will also affect the overall transaction timetables, as it may also result in extended periods between signing and closing, as completion cannot take place until approval has been obtained.

Read the proposed Act (in Danish).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.