Analysis | An open letter to global investors: reflections on property rights above 60°
Jessica Shadian
On October 16-18, over 1,800 people from 50 countries met in Reykjavik, Iceland, to attend the – now annual – Arctic Circle conference (this year even included a pep rally for December’s UN climate summit in Paris, led by François Hollande, the French president, himself). One major theme of the conference this year focused on critical Arctic infrastructure and how to finance such development.
The Guggenheim Group, an investment firm, that is partnering to a degree with the Global Agenda Council on the Arctic (GACA) under the World Economic Forum (best known for its annual meeting bringing together businesspeople and world leaders) has set out to create an Arctic Investment Protocol, an Inventory of Arctic Infrastructure and, ultimately, possibly create an Arctic Investment Bank.
At Arctic Circle, Guggenheim put together a number of workshops in which it stated that it wanted “to know more” and that it wanted “to learn more” about the Arctic. In that spirit, I hope these thoughts contribute to sparking a broader conversation amongst Guggenheim and any others who wish to endeavour to “chart a course ahead” by investing in the Arctic. Given the academic I am, let’s just call this a seminar style conversation about ‘Who Owns the Arctic 101: Property Rights above 60°.
As a quick preamble, an Investment Protocol for the North requires knowing the protocol of Northerners themselves. That protocol is a simple one: collaboration is an imperative and self-determination is the goal. Any type of legal protocol (soft law or otherwise), therefore, must not only assure full negotiation between local communities and the investors and businesses who wish to come North, but it must actually be driven by Northern communities themselves. At the end of the day if you do not have local buy-in you will not succeed.
On that note, investing in the Arctic does not mean engaging with local and indigenous communities (as many Arctic and other declarations profess to do) by bringing investment ideas to the North. Rather, it means that the plans need to be created in the Arctic and in full collaboration with Northerners. If you are asking yourselves “did it help indigenous peoples?” after a project is complete (as was quoted in the infrastructure inventory meeting) then in all likelihood your efforts failed. This then brings us to some very minimal in’s and out’s about property rights when it comes to the Arctic.
Property rights north of 60°
Property rights in the Arctic are multifaceted and vastly different from Arctic region to Arctic region. When it comes to many indigenous communities in the Arctic, matters of indigenous inclusion is not a discussion about consultation; Free, Informed, and Prior Consent; or even international rights for indigenous peoples. It is a discussion about who actually owns the Arctic: who owns the land, its resources (surface and subsurface), and coastal waters.
While it could be argued that the duty to consult; free, informed and prior consent, etc are great advancements in aboriginal-state relations from a historical perspective, they are considered as a minimal starting point for rectifying past injustices. If one assumes that the inclusion of statements which professes to consult with indigenous peoples is fait accompli those intentions will not only come across as disingenuous but, moreover, they are a very naïve way of thinking when it comes to many instances of Arctic aboriginal entitlements on the ground; a way of thinking which will also result in failure.
The Inuit land claims agreements, for example, were born from land-claims processes which began in Alaska and were followed by further land-claims agreements in Canada and Greenland home rule (which is now self-rule). While the land-claims agreements in many cases created public governments they also include specific indigenous rights to and sometimes ownership over those lands.
And, while the co-management of resources on Inuit inhabited areas are arrangements that were frequently made in collaboration with state and federal governments the resources being managed and the revenues generated are often controlled or owned by the local communities themselves.
In Alaska, for example, the 1971 Alaska Native Claims Settlement Act (ANCSA) helped establish 13 regional, for-profit corporations to facilitate the transfer of property and monetary compensation. The size and value of these Native corporations should not be underestimated. The Arctic Slope Regional Corporation (ASRC), for instance, has annual revenues which exceed $2.7 billion. It is no surprise then that ASRC is the largest Alaskan-owned company with approximately 10,000 employees worldwide. It owns title to nearly 20,000 square kilometres of land on Alaska’s North Slope which contain a high potential for oil, gas, coal and base metal sulphides as well as subsurface rights to certain lands, and has surface rights to other lands (as quoted on its webpage). ASRC, for all intents and purposes, could start an Arctic Investment Bank on its own.
NANA, likewise owns 9,000 square kilometres of the NANA region. It also includes ownership of both surface and subsurface acreage and has annual revenues which exceed $1 billion. Given the size and power that Alaska Native corporations such as ASRC and NANA maintain, these corporations have a rightful place to be full contributors on all Arctic board of advisors working to create Arctic Investment opportunities and other business efforts in the North.
In Canada, the Nunavut Act, amongst other Inuit land claims agreements, established Inuit autonomy over all marine areas adjacent to the coastlines of the islands of the Arctic Archipelago, including the waters of the Northwest Passage. Nunavummiut have also obtained title to lands (including mineral rights and the right to harvest wildlife), three new national parks, equal co-management of those lands, capital transfer payments and 5% royalties from the development of crown lands. This includes the right to negotiate with industries for impact mitigation, as well as economic and social rights pertaining to the development of non- renewable resources.
Moving over to Greenland, while no individual is able to own land, the 2009 Self-Rule Act gave Greenland the right to develop its subsurface minerals, minerals which were determined belong to Greenland. Thus, Greenland achieved total control over its renewable and non-renewable resources. What these instances amount to is that Northern communities do not need to be brought into the 21st century by others. Rather, all Southern investors require full Northern collaboration if they wish to make money off of the growing economic interest and opportunities in the Arctic.
When it comes to the Arctic Investment Protocol in particular, the Trustees for Alaska, a non-profit law firm, recently pointed out on its website that “initiatives for development already involve planning for Public-Private Partnerships. These partnerships have been problematic in the past and often leave governments holding the financial losses after the private sector has obtained their profits”. It went on to note that “while the World Economic Forum is working on an Arctic Investment Protocol, an Arctic Infrastructure Inventory, and an Arctic Permanent Investment Vehicle, these efforts would not regulate activities in the Arctic and are not likely to have enforceable teeth”.
To date, there is little if any information from Guggenheim or GACA about the manner in which public-private partnerships (with assets which are conventionally public goods) will ultimately be financed and what the expectations will be on returns on investments, questions which speak to the very value driven nature of the protocol itself. It is one thing for a protocol to want to promote economic growth and build resilient communities but the reality is that ports and roads, for instance, are not money-makers in and of themselves. Will a public road become a toll road? Will bridges or tunnels be financed through tolls? Will communities be left to pay the bills when the mine attached to the road, for instance, closes?
One Arctic region that recently opted out of a potential foreign capital investment to help fund critical infrastructure is Greenland. As reported by, Sermitsiaq, a national weekly, the municipality of Qaasuitsup Kommunia, promoted an infrastructure development plan in which it wanted the Self-Rule administration, which owns and operates the airports – to enter into discussions with a group of international investors (Siemens among others) to create an airport runway for transatlantic aircraft, as well as a new port and hotel capacity in Ilulissat, the municipal seat.
As reported in Sermitsiaq, the investor group had a number of conditions including turning the airport into a hub monopoly (all transatlantic flights would have to go in and out of that airport). In addition, the investment group demanded a return on investment of 8-10% at a time when the Self-Rule Administration was able to borrow funds at just under 2% in the international financial market. The Self-Rule Administration was also required to give a public guarantee to back the loans, essentially meaning that all debts would have to be paid with public funds, ie by Greenlandic taxpayers, while all surplus would go to the investors. In the end, the Self-Rule Authority declined to enter into negotiations with the private investment group.
This example naturally leads to the question of: in what way, if any, would Guggenheim’s expectations be different than every other private investment group? At the end of the day any investment group will be required by their own investors to assure a certain return on their investments. Is it enough to see Alaska as “America’s crown jewel” that a public guarantee to back to the loans is not a necessity? Will investors be willing to finance projects which could likely generate only nominal returns on investment for many years to come? And, if so, why? What is the business case for justifying and seeing this argument through to fruition? In the end, if an investor asks for a public guarantee to back their loans, are they still adhering to the Arctic Investment Protocol which aims to see the “long-term sustainability and economic diversification of projects and communities”? The public debt that could be accrued by an infrastructure project gone awry would certainly undermine any attempt to achieve that goal.
At the same time, discussions of public-private collaboration and the idea of selling public assets for private investment seems like a contradiction to indigenous self-determination. Have indigenous corporations or indigenous governments let on to investors that they would be willing sell off their hard fought and re-acquired assets? Would that not be essentially selling off self-determination?
Moreover, and this leads to another question that needs to be asked when it comes to the Arctic Investment Protocol: Who will oversee the idea that everyone is “bound by the Arctic Investment Protocol”? Will Guggenheim or GACA be the gatekeepers of the North? Will Northern investment be guided by a protocol driven by an Investment Fund Company based in Los Angeles? Could this same Southern entity then potentially prevent Arctic indigenous corporations from developing resources on their own lands – the lands that they own (if they deem them to not be in accord with their protocol)?
It should be stated up front that nothing being written here is to say that Northerners do not welcome Southern investment in the North. I think one would be hard pressed to find a Northern community that is not looking for investment opportunities to help build needed critical infrastructure: infrastructure which ranges from affordable housing to ports, roads, sewage, fibre-optic telecommunications, all forms of affordable energy and the list goes on.
What is equally critical about this need, however, is not only the infrastructure itself but that all infrastructure projects contribute to building a lateral rather than vertical infrastructure system – linking the western Arctic to the eastern Arctic rather than merely bringing capital from the South to help realise Northern infrastructure projects (in which all roads and resources lead South).
This is where an Arctic Investment Bank of some type could be of great interest; if its mandate and focus was to build east-west infrastructure. Yet, before jumping ahead, when it comes to inventorying critical infrastructure, what is it exactly that we are taking about? Are Guggenheim and other investors interested in putting money into sewage and housing, for instance? While critical to many Arctic communities, these are certainly not as sexy as deep-water ports to help facilitate global trade. Could critical infrastructure also mean investing in roads and other forms of transport that not only or will not necessarily lead to mines or ports but transport that links communities across the North? For many Northerners, all lateral infrastructure investments are viewed as critical infrastructure.
Further, we learned at an Arctic Circle workshop that Guggenheim is setting out to create a comprehensive database – housed in “certain Arctic universities” – to help decide which projects are most ready. Frankly, if you talk to the right people, this should not take more than one hour of your time. People in the North know what needs to be built and what projects would be ready to go. These thoughts should not be taken as a reaction to the idea of an inventory itself, it is the nuances of what this entails rather (eg who is in charge), which leave those interested wanting.
Along these lines and recognising the broader need for the global community to better understand local realities on the ground, a number of Artic regions have begun discussions for a renewed Northern Forum; possibly a Northern Forum 2.0. One of its discussions when the Northern Forum meets this week could be about creating an inventory of critical Arctic infrastructure authored by Northern regions themselves.
In conclusion, and perhaps these words should have been the point of departure and introduction for this letter. Instead I will end with them. The page in history which should not fall to the bottom of the stack, slip off of anyone’s desks or be pushed aside for compiling investment portfolios is the one which is about the colonial history that carved up the borders of Africa.
‘Africa’ was believed by Europeans to be one ungoverned place, terra nullius. We now know that was never the case. In the same measure, the Arctic was never and is still not an uninhabited, ungoverned or underdeveloped last frontier. The Arctic has, in fact, always been a vibrant part of global politics and global circumstances and this remains through today.
Beginning with the ancestors of Inuit, for instance, who migrated from Siberia across to Greenland more than a thousand years ago, followed centuries later by European fur traders, whalers, prospectors and eventually the mining and oil companies, the Arctic has never been a frontier but rather an epicentre of global trade. What has changed, however, from the days of the fur trade is that in today’s global economy many indigenous peoples are the owners of multi-national corporations of their own, as well as the rights-holders of considerable portions of Arctic land, resources and marine waters, from which they receive royalties, and in some instances maintain outright ownership over.
Ultimately, doing business in the Arctic means that you are doing business with indigenous governments and indigenous corporations, not consulting with them. The gatekeepers of the Arctic today are those who own the Arctic: the Arctic residents themselves. Global investors, are you setting out to invest in or invest with the Arctic? I hope the latter. Nuance matters, and that nuance will determine the future of your success.
The author is the Nansen Visiting Professor (2015-2016) at the University of Akureyri, Iceland, and a senior fellow at the Bill Graham Centre for Contemporary International History, Trinity College, University of Toronto. Her latest book is: ‘The politics of Arctic Sovereignty: Oil, Ice and Inuit Governance’ (2014).
Originally published by The Arctic Journal. Re-published here with the permission of the author.
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