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What financial system can facilitate Ukraine’s post-war recovery and development? A new report provides a clear answer: an effective, competitive and widely trusted financial system that lives up to recognised standards of integrity, is compliant with the EU accession process, and assumes a recognised role in Europe’s banking and capital market unions. The team of authors, which combines leading Ukrainian economists with experts from CEPR’s Research Policy Network on European financial architecture, stress that a well-designed financial sector – the whole of banks, capital markets, insurance, mortgages, financial regulation and supervision – can play a catalytic role in Ukraine’s reconstruction. Preparing for EU accession can help to steer that process and build confidence among investors and the public, at home and in the international community.

Discussions about the post-war reconstruction of Ukraine inevitably start with observing the huge physical damage inflicted in the course of the Russian invasion, and the consequent need for the rebuilding of hospitals, housing, schools, and other essential infrastructure. But this tragedy also gives Ukraine an opportunity to build back better, to modernise the country along many dimensions, and to be ready to withstand possible further Russian aggression and become an important element of the NATO security system (Becker et al. 2023, Gorodnichenko and Rashkovan 2022, Gorodnichenko et al. 2023).

To this end, ravaged by war as it is, Ukraine will need massive support from its allies. The key policy question is how to ensure first, that resources become available in sufficient volume, and second, that they go to the best uses and foster sustainable development of the country. As we argue in a new report (Carletti et al. 2024), both aspects are deeply dependent on the existence of a widely trusted and visibly effective financial system. The emerging financial system in Ukraine is supposed to function well at two levels: channelling investible funds; and establishing good governance by screening and monitoring projects across the country.

In thinking about Ukraine’s future, there is a clear precedent in the provision of large-scale aid from the US to Europe after WWII. The European Recovery Program or Marshall Plan of 1947 is often held up as the ‘gold standard’ for the economic reconstruction of areas in the wake of political, military, or economic devastation because it stood at the beginning of an era of unprecedented growth coupled with political stability. To be clear, the Marshall Plan was not just about the transfer of money, but rather about institutional reforms such as establishing deep connections linking national economies to their neighbours and to the world, and helping to create an effective financial system domestically.

In the three-quarters of a century since the launch of the Marshall Plan, the world has accumulated a rich experience of reconstruction and development efforts. History is littered with failed attempts to impose designs and manage domestic processes, but also impressive examples of collaborations that have fuelled rapid recovery. The successes point to the need for strong recipient country ownership of donor coordination and application of core governance standards along with environmental, social and procurement standards. Ukraine’s reconstruction and modernisation offer rich opportunities to put these lessons to use and ensure that the country’s transition to an advanced European economy goes as quickly and smoothly as possible.

Consistent with this view, German Chancellor Olaf Scholz declared at the June 2022 G7 summit at Schloss Elmau, Germany, that there was a consensus that a new Marshall Plan was needed. In a similar spirit, the G7’s first major international conference on the “Recovery, Reconstruction and Modernisation of Ukraine” in October 2022 underscored the role that institutions play in governing and coordinating recovery and reconstruction, as well as the need to establish a recovery framework that emphasises cross-border linkages and a deepening relationship of Ukraine with the EU, with membership as one stage in that process (G7 Germany 2022).

These aspirations will require large investment. Funds will partly be drawn in from public sources, national and international. Some foreign public capital will come from international institutions and sources such as the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), and the World Bank. But a large part of the required funds will have to be mobilised from private sources abroad. Furthermore, such a mobilisation will not be possible without mobilising domestic savings.

This report makes a series of proposals on reforms and policies necessary to achieve these goals. We stress that a well-designed financial sector – the whole of banks, capital markets, insurance, mortgages, financial regulation, and supervision – can play a catalytic role in Ukraine’s reconstruction and development. We also show how preparing for EU accession can help to steer that process and build confidence among investors and the public.

What financial system can facilitate recovery and development? The answer is clear to us: an effective, competitive, widely trusted financial system, living up to recognised standards of integrity, compliant with the EU accession process, and assuming a recognised role in Europe’s banking and capital market unions.

What strategic steps are necessary to deliver this longer-term vision?

Principle #1: Ukraine’s institutional framework for banking and financial markets should be aligned with that of the euro area and the EU’s Banking Union, in particular with regard to financial legislation and supervisory practice

To access global capital and to converge with the rest of Europe, Ukraine has to integrate its financial system into European markets and institutions. This does not mean that Ukraine should copy everything from the euro area’s regulatory framework right away. But to integrate fully into the euro area’s banking and capital markets and thus tap into vast resources and experiences, Ukraine will need to adopt the euro area playbook.

For example, on its transition to EU accession, Ukraine could and should sign a formal agreement with the EU’s Single Supervisory Mechanism to help align supervisory standards and practices with those commonly applied inside the EU.

In a similar spirit, aligning enforcement for transparency and reporting (e.g. the International Financial Reporting Standards, the International Sustainability Standards Board, and the European Securities and Markets Authority) should facilitate more the access, at least for large Ukrainian firms, to capital markets outside the country (e.g. Frankfurt, London, Paris, and Warsaw), thereby unlocking potentially significant investments and strengthening their governance.

The same logic suggests that the resilience and international recognition of the mortgage lending market in Ukraine can be supported by introducing collateral rules in line with international practice, for example limiting the ratio of loan-to value and debt-to-income service, and strengthening the role of covered bonds and specialised lending institutions, such as savings and loans associations.

Finally, by making the institutional framework compatible with the EU, Ukraine should facilitate the entry of foreign banks and other financial firms, thus deepening domestic capital markets further and boosting competition.

Principle #2: Financial sector effectiveness can be significantly improved by creating recognised and catalytic institutions that are capable of coordinating international donors and investors, as well as integrating foreign capital markets and domestic financial institutions

We suggest establishing three institutions, partly based on existing institutions, in order to strengthen and widen Ukrainian ownership of the reconstruction and reform process.

First, a National Reconstruction and Reform Council (NRRC) should be established that develops and communicates a broadly shared vision for reconstruction, strives for agreement on the reform agenda and monitors its implementation.

Second, a Ukraine Development Bank (UDB) could leverage the capacity of existing banks in the country’s reconstruction and ambition to build back better. The UDB would raise capital in the markets to finance programmes (e.g. machinery, energy, housing) by entering into co-financing deals with existing banks, thereby leveraging their ability to invest. Moreover, the UDB would lend to sub-sovereign entities carrying out infrastructure projects (roads, rails, reconstruction). The UDB is envisioned as an institution co-owned by national and multilateral development banks, to ensure world- class practices as well as access to cheaper capital in international markets.

Third, a Ukraine Development Platform (UDP) would be a multilateral venture, with strong Ukraine ownership, that is dedicated to strategic planning and donor coordination relating to the reconstruction effort during and after the war. The government would put projects on the platform for multilateral and bilateral development banks to explore how they could collaborate. The UDP would also promote core standards to be applied to projects and encourage development institutions to come together in financing individual projects.

Together, the UDB and the UDP should be capable of facilitating Ukrainian banks’ access to international capital flows, while the NRRC would help to ensure a broad consensus within Ukrainian society for the reform agenda.

Figure 1. Proposed architecture: new institutions for financing recovery

Principle #3: Reforms of the financial sector should seek to resolve post-war legacies and deliver a market-based allocation of capital

There is a clear need to recapitalise banks and compensate for losses caused by war- related non-performing loans. To the same end, war insurance and various public–private partnerships are needed to de-risk investment and credit in a country that is likely to continue to live in the shadow of potential Russian aggression.

To support the achievement of a market-based allocation of capital, the government should privatise state-owned banks by selling stakes to investors and other banks, aiming for a diverse and competitive, (largely) privately owned domestic banking landscape, with somewhat limited roles for institutions remaining under state ownership.

Principle #4: Financial development should be supported by broader reforms of corporate governance, the rule of law, pension systems, etc. – and by a favourable macroeconomic environment

Over the last decade, Ukraine has made great strides in strengthening its macroeconomic framework and banking sector, but these achievements must now be supplemented by wider governance reforms. In a nutshell, reforms of the financial sector are unlikely to yield sustainable benefits if the rest of the country suffers from corruption, if households have few incentives to save, if investors cannot protect their projects from expropriation, if markets are closed to competition and if oligarchs control much of the economy.

Because broader reforms are essential for EU accession, we can hope that the determination of Ukraine to join should provide a sufficiently strong institutional anchor that motivates them.

Principle #5: Faith in the long-term success of Ukraine

We would like to flag the final key ingredient: faith. We see the prospect of Ukraine as a free, democratic and prosperous country and a full EU member as a faith-breeding promise in the sense of Gerschenkron (1962). We hope that others share our faith in the long-term success of Ukraine, not only for the sake of the brave Ukrainians who defend their homes and freedoms but also for anybody who believes in the free world.

Source: https://voxukraine.org/en/ukraine-s-reconstruction-policy-options-for-building-an-effective-financial-architecture

The European Business Association offers Kyiv Post insights into how Ukraine can attract more business to help in both during the war and in the post-war recovery.

Ukraine’s economy has proved to be a resilient one. Notwithstanding the ongoing war, most Ukrainian companies continued working, and during the second year since the full-scale Russian invasion some have even increased their activity. Kyiv Post spoke to Katerina Morozova, Head of the European Business Association (EBA) Odesa – Southern Ukraine Office.

Assessing the resilience of Ukrainian companies amidst the ongoing war

Businesses in Ukraine continue to operate and show financial results even in such difficult conditions. We see a gradual but steady trend of recovery in business activity and financial performance starting in 2022.

Currently, 78 percent of the Association’s member companies are operating at full capacity, while a year ago only 54 percent were fully operational. The number of companies with restrictions on their operations continues to decrease – from 46 percent last year to the current 21 percent. The most common restriction remains the reduction of the companies’ geographical scope of activity. Currently, 1 percent of the companies surveyed are not operating.

The majority of companies, namely 88 percent, pay salaries in full, while 15 percent pay bonuses or additional funds. At the same time, 43 percent of the companies have increased the salary level for their employees. The number of companies that reduce the level of pay or dismiss personnel in 2024 remains quite low and currently stands at 5 percent and 3 percent, respectively.

Companies support the Armed Forces of Ukraine (AFU) and the number of their own employees’ in the AFU remains high, with as much as 57 percent of respondents continuing to provide financial support. In addition, 45 percent supply their own products to the needs of the AFU and vulnerable groups, 26 percent provide services, 18 percent provide medicines, and 12 percent supply protective/defense equipment. The volume of assistance to the army and the population from businesses has remained stably high since the beginning of the full-scale invasion.

Ukrainian businesses maintain financial resilience despite significant losses from the war. Currently, 46 percent of the surveyed companies have financial reserves for more than a year, 19 percent for a year, 24 percent for six months, and 6 percent for several months.

Critical factors for successful reconstruction

The war unleashed by Russia against Ukraine has caused significant damage to the Ukrainian economy. Many businesses have been destroyed, others have lost markets or supply chains. However, in order to achieve success in this direction, it is necessary to carefully consider several critical factors:

• Fighting corruption. Corruption is a serious threat to any economy. Ensuring transparency, anti-corruption laws and effective control over the activities of government bodies will help reduce corruption risks and attract more investment.
• Business regulation reforms. Simplifying business registration procedures, reducing bureaucratic barriers and improving the legal system are key aspects that will help support entrepreneurship development and attract more investment.
• Human resources development. Investing in education and skills development of workers is key to creating a competitive workforce that meets the needs of the labor market.  

Among the main drivers of change in business sentiment, top managers cite the military situation, the mobilization situation and uncertainty with regard to international aid (above all from the US).

At the same time, much will continue to depend on international support – whether it will remain at the same level, which would allow us to keep the front line and the macroeconomic situation stable.

The judicial system does not really work the way it does abroad, which makes it difficult for investors to feel confident and get guarantees.

Ukraine’s preparedness to welcome international investors: ensuring transparency and legal integrity

Before the war, the main problems were the lack of rule of law and a weak judicial system. The problem of corruption is closely related to these factors. When we talked to investors about the main obstacles, they always singled out these problems among their main concerns. However, when we analyze other countries, we see that the situation in Ukraine is not so bad. The problems with corruption sometimes seem exaggerated. But the judicial system does not really work the way it does abroad, which makes it difficult for investors to feel confident and get guarantees.

Investors see the news about the events in our country, and for them it becomes an obstacle to making a decision to invest in Ukraine. Those companies that already operate in Ukraine do not feel fear, because they are already familiar with our territory and understand how to work here. We need to work with them, especially when the general perception of Ukraine abroad is reduced to such concepts as “loans, corruption, war.” That’s why we, as an association, decided to launch a new project “Global Business for Ukraine.”

The project aims to create an international business network to promote opportunities in Ukraine. This network will be a significant complement to economic diplomacy, which, in our view, will enable more effective work by engaging investors who either know little about Ukraine or have too much negative information. It is important to understand that investors often study how to do business in Ukraine and with whom to collaborate. They learn about local business processes, and when this is overshadowed by a negative background of corruption and lack of rule of law, the decision to invest in Ukraine can become very difficult for them.

Comprehensive work is needed. On the one hand, within the country, we must ensure the effective operation of our institutions. Special attention should be paid to the judicial branch to ensure it truly works in favor of citizens.  

On the other hand, we must actively work abroad, expanding information about the opportunities and advantages of doing business in Ukraine. When communicating with members of our association, we see that many of them successfully conduct their business even in modern conditions.

Amidst the challenging times, Ukraine has seen notable investments that underscore its resilience and potential for growth:

• Bayer Group is injecting €60 million ($65 million) into seed production despite the ongoing war with Russia. This investment includes expanding drying capacities, constructing bomb shelters for employees, and upgrading machinery and equipment.
• Carlsberg Ukraine unveiled a significant investment project in 2023, injecting Hr.1.5 billion ($39 million) into a new production line at the Kyiv Brewery. The line, equipped with cutting-edge technology, aims to enhance operational efficiency, meet consumer demands, and boost brewery capacity by 80 percent.

Despite the challenging time, the war has not stopped investment activity in Ukraine. Of course, the risks have significantly increased, but new opportunities have also emerged for those willing to seize them.

Source – https://www.kyivpost.com/post/30574?fbclid=IwAR32nzPjTnNqFSvdHvgTXe7oXOVx3zTuNN33zcWpaeDtKhvbsZmVkqI3E08

PART 2: LAUNCH OF THE REGISTER OF DAMAGE FOR UKRAINE

Yesterday, the Register of Damage for Ukraine (the “Register”) officially launched, meaning that the claims submission process for those seeking compensation for the damage inflicted by the war in Ukraine is now open.¹

The Register, established within the framework of the Council of Europe and supported, among others, by Canada, the European Union, Japan, the United States and the United Kingdom, stands as a pivotal initiative in response to the full-scale military invasion of Ukraine by the Russian Federation (“Russia”).  It aims to provide a structured framework for recording compensation claims for damages, losses, and injuries inflicted by the invasion.²  

In Part 2 of our new Series entitled “Russia: Investment Protection and Arbitration”, we focus on the mandate, functions and operational framework of the Register and highlight key points for potential users of the Register.

REGISTER’S MANDATE AND FUNCTIONS

The Register is a digital platform tasked with receiving and processing the claims for damages and related evidence arising from the Russian invasion of Ukraine.

The Register was established in May 2023 within the framework of the Council of Europe by Resolution CM/Res(2023)3 establishing the Enlarged Partial Agreement on the Register of Damage Caused by the Aggression of the Russian Federation Against Ukraine.³

Serving as the first component in an international reparations mechanism for Ukraine, it is aimed at capturing damages, losses, and injuries, incurred in Ukraine by individuals, companies and the State of Ukraine due to the Russian invasion.  The Register’s role does not extend to assessing the validity (beyond eligibility) or value of claims, nor does it authorize any payments.  Rather, its function is solely to document these claims for potential future action. 

In addition to the Register, future compensation mechanisms for damages caused by Russia’s aggression against Ukraine are expected to include a claims commission and a compensation fund (both requiring separate international instruments to be established).⁴

ORGANISATIONAL STRUCTURE

The Register is governed by the Conference of Participants, representing the European Union and forty-three member states of the Register.⁵  This body is responsible for approving rules and regulations, adopting budgets and providing oversight, as well as appointing members of the Board of the Register (the “Board”).

The Board is the key authority responsible for the functioning of the Register, comprising experts in international law, war damages, and claims resolution.  Based in The Hague, the Netherlands, the Board’s role is to assess claim eligibility and develop operational rules and regulations.

The Executive Director of the Register oversees the daily work of the Secretariat of the Register (the “Secretariat”), coordinates and forwards claim submissions to the Board and liaises with national and international bodies to ensure that the Register operates smoothly.  The Secretariat provides administrative as well as substantive and technical support in relation to the maintenance and functioning of the Register.

ELIGIBILITY CRITERIA AND CLAIM CATEGORIES

To qualify for inclusion in the Register, the claims must satisfy all of the below criteria:

• incurred on or after 24 February 2022;
• incurred within the territory of Ukraine (including its territorial waters); and
• caused by Russia’s “internationally wrongful acts in or against Ukraine”.⁶

The Rules Governing the Submission, Processing and Recording of Claims provide for an additional eligibility criterion that the claim shall be submitted “by or on behalf of an eligible Claimant”.⁷

The categories of potential claimants are broad and cover:

• natural persons;
• legal persons (including foreign companies); and
• the State of Ukraine, which includes “regional and local authorities, and state-owned or controlled entities”.⁸

In order to submit their claim, legal entities and the State of Ukraine must engage duly appointed representatives (such as lawyers), while individuals have the option to proceed without representation.  The rules on the use of representatives are expected to be adopted separately.⁹

Anticipated categories of damages encompass personal injury, property loss, business loss, damage to infrastructure, and environmental harm, among others.¹⁰

The Board has opted for a phased approach to the implementation of the Register.  The launch on 2 April 2024 focusses solely on one critical category of damage, namely damage or destruction of residential property.  Subsequent phases are expected to also address the claims from individuals most severely impacted by the conflict, claims concerning the damage or destruction of Ukraine’s critical infrastructure and claims from businesses (including foreign companies) which suffered business losses, as well as infrastructure and other damages as a result of the invasion.  

In terms of claims that may be made by legal entities, the non-exhaustive list of categories¹¹ include not only claims for damage or destruction of property and other assets, but also business and other economic losses like the loss of control of property in temporarily occupied territories, relocation (evacuation) of businesses, and humanitarian expenditures.

OPERATIONAL FRAMEWORK AND SUBMISSION PROCESS

The primary features of the Register’s operational framework unveiled thus far are as follows:

• claim submission will be exclusively in digital form, utilising the Diia mobile application which is already widely used in Ukraine for a variety of State services;
• claims will be filed using specific forms published by the Board;¹²
• the filing of claims is free of charge;
• initially, claims may only be submitted in Ukrainian, with an English language option expected to be available later;
• no specific deadlines for claim submission have been announced yet (although this may be subject to change in the future); and
• decisions on the eligibility and subsequent recording of claims in the Register will be made by the Board.

IMPORTANT POINTS FOR POTENTIAL CLAIMANTS

While the Register does not have adjudicatory functions with respect to submitted claims, such as determining responsibility or allocating payments or compensation, the submission of a claim (and the quality of supporting evidence) can significantly impact the likelihood and extent of recovery of any compensation.  Therefore, it is advisable to approach the claim preparation and submission process with due attention and diligence, even though the submission via the mobile application Diia or its web portal might seem straightforward.

Our initial observations in relation to the Register’s framework include the following:

• a wide range of evidence is available for submission, including expert reports, digital data, documents and media;
• although the Board does not have adjudicative functions, it retains the power to not record a claim “with prejudice” (preventing resubmission of the same claim),¹³ including when it deems a claim “manifestly unfounded”;¹⁴ and
• in its decision-making, the Board may take into account judgments or awards from national or international courts, tribunals and other adjudicative bodies within the Register’s mandate, although it is not bound by them.¹⁵

In respect of the latter point, claimants who have previously explored other avenues such as (i) litigation in Ukraine or (ii) international investment arbitration to recover losses incurred from the Russian invasion of Ukraine may need to reconsider their strategies in light of the launch and subsequent activities of the Register. 

However, as the mandate of the Register does not extend to damages suffered before 24 February 2022, individuals and companies who have already pursued avenues like international investment arbitration to seek redress for damage caused by the Russian Federation’s illegal occupation of Crimea or support for separatist movements in the so-called Donetsk People’s Republic and Luhansk People’s Republic in eastern Ukraine since 2014 will not be directly impacted by the Register’s operation (at least until the three-stage compensation mechanism, including the claims commission and compensation fund, is established). 

CONCLUDING REMARKS

The commencement of operations by the Register on 2 April 2024 marks a significant initial stride towards accountability and reparations for victims of the invasion.  With its primary function lying in documenting claims and underlying evidence, the Register does not serve as a comprehensive avenue for compensating damages, losses and injuries caused by the war.  Nevertheless, it represents a pivotal first component of an eagerly anticipated multifaceted reparation mechanism, which is expected, in due course, to encompass the evaluation and enforcement of claims.  We will provide further Legal Insights about the claims commission and compensation fund as soon as there are any significant developments in respect of their launch.

Mayer Brown continues to monitor the relevant developments and is well-placed to provide assistance in navigating the Register and the claims process.  Drawing on our expertise in international dispute settlement, Mayer Brown stands ready to offer tailored guidance and support to claimants seeking compensation for damages incurred due to the Russian invasion of Ukraine.  This includes, but is not limited to, utilising the existing mechanism offered by the Register, as well as anticipated future developments within the same framework.

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¹ See official press-release, dated 27 March 2024, available at: https://rd4u.coe.int/en/-/register-of-damage-for-ukraine-to-open-for-claims-submission-on-2-april-2024.

²See official webpage of the Register available at: https://rd4u.coe.int/en/home.

³ Pursuant to Article 1.1 of its Statute, as adopted by the referred Resolution, dated 12 May 2023 and amended on 27 September 2023 (the “Statute of the Register”), the Register is defined as “The Register of Damage Caused by the Aggression of the Russian Federation against Ukraine”.

⁴ Statute of the Register, Article 2.5.

⁵ The member states of the Register include Albania, Andorra, Austria, Belgium, Bulgaria, Canada, Croatia, Cyprus, Czechia, Denmark, Estonia, European Union, Finland, France, Georgia, Germany, Greece, Iceland, Ireland, Italy, Japan, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Republic of Moldova, Monaco, Montenegro, Netherlands, North Macedonia, Norway, Poland, Portugal, Romania, San Marino, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Ukraine, United Kingdom and United States of America.

⁶ Statute of the Register, Articles 1.1 and 2.2.

⁷ The Rules Governing the Submission, Processing and Recording of Claims (the “Claims Rules”), as adopted by the Register’s Board on 21 March 2024, available at https://rd4u.coe.int/en/documents.

⁸ Statute of the Register, Articles 1.1 and 2.3.

⁹ Claims Rules, Article 11.2.

¹⁰ See The full list of categories of claims eligible for recording available at https://rd4u.coe.int/en/documents.

¹¹ See The full list of categories of claims eligible for recording available at https://rd4u.coe.int/en/documents.

¹² For example, the claim form for damage or destruction of residential immovable property is available at https://rd4u.coe.int/en/documents.

¹³ Claims Rules, Article 21.7(b).

¹⁴ Claims Rules, Article 18.2.

¹⁵ Claims Rules, Article 21.3.

Source – https://www.mayerbrown.com/en/insights/publications/2024/04/russia-investment-protection-and-arbitration-part-2

Since the enactment of martial law, Ukraine has introduced several changes to its legislation regulating construction issues. At the same time, the ongoing process of digitalization of the construction permit system continues.

Below is a brief description of changes that are most important for business.

Law of Ukraine “On Guaranteeing Proprietary Rights to Real Estate Objects to be Constructed in the Future” dated 15 August 2022, No. 2518-IX (the “Real Estate Objects Law”)

The Real Estate Objects Law seeks to protect ownership rights to real estate objects under construction. It introduces a new special property right to a future real estate object, subject to state registration.

A future real estate object is defined as a part of a divisible object under construction, as provided for by the construction and design documents, which after construction and commissioning, will become a separate real estate object (e.g. apartment, garage, other residential or non-residential premises, parking lot, etc.).

The Real Estate Objects Law divides objects under construction into:

• Divisible – those containing two or more future real estate objects, and
• Indivisible – those which do not contain any future real estate objects.

The list of the main technical characteristics of a divisible object under construction and information about future real estate objects that have been or are being sold were approved by Resolution of the Cabinet of Ministers of Ukraine dated 21 April 2023 No. 378 “Some Issues of Implementation of the Law of Ukraine “On Guaranteeing Proprietary Rights to Real Estate Objects to be Constructed in the Future”. According to the above Resolution, the construction customer (developer) must publish information on the technical characteristics and future real estate objects that have been or and are being sold on its website.

In order to guarantee the rights of buyers of future real estate objects, the Real Estate Objects Law stipulates that divisible objects under construction cannot be put into the stream of commerce , except in cases where they are mortgaged and the developer is replaced. Furthermore, the construction customer is obliged to determine a list of future real estate objects that will constitute a guarantee share, i.e. a set of future real estate objects, which is determined for each divisible object under construction (each stage of construction/each commissioning portion), proprietary rights to which should be encumbered before the commissioning of the finished object of construction (stage of construction / commissioning portion) in order to guarantee the completion of the relevant object by other persons (including due to bankruptcy, financial insolvency of the construction customer/construction developer).

The minimum guarantee share is determined by Resolution no. 8 of the Cabinet of Ministers of Ukraine dated 3 January 2023 “On Determining the Minimum Guarantee Share for the Construction of Real Estate Objects”. It is defined as a percentage of the total area of future real estate objects in a divisible object under construction (stage of construction/commissioning portion) in accordance with the design documents for construction when such area should make:

• 10 percent of the area of future real estate object(s)– for the cities of Kyiv, Dnipro, Lviv, Odesa, Kharkiv;
• 5 percent of the area of future real estate objects(s) – for other localities.

Law of Ukraine “On Amendments to Certain Laws of Ukraine on Priority Measures for Reforming the Urban Planning Sphere” dated 12 May 2022 No. 2254-IX (the “Reform Law”)

The Reform Law sets out a new special type of urban planning program to ensure the restoration of communities, which have suffered as a result of the armed aggression against Ukraine or of other socioeconomic, infrastructural, or ecological crises. These regional or local restoration programs will determine the key spatial, urban planning and socioeconomic priorities of the restoration policy and will include measures to ensure the restoration of the relevant region. The comprehensive restoration program is not part of urban planning documentation.

The provisions of the approved restoration program are components of the initial data for the development and introduction of changes to the urban planning documentation at the local level.

The Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine Regarding Land Use Planning” dated 17 June 2020 No. 711-IX (as amended) introduced a new type of urban planning documentation at the local level – a comprehensive plan for spatial development of the territory of a territorial community. It also introduced other changes to the law in terms of regulating the development of urban planning documentation at the local level. Thus, the development plans under this law will have to take into account the relevant comprehensive restoration program.

The Reform Law regulates urban planning issues that are necessary to solve urgent problems caused by the war, in particular:

• Location, including construction, of buildings and structures intended for temporary residence of internally displaced persons who lost their homes as a result of armed hostilities;
• Relocation (evacuation) of production facilities of enterprises from the war zone;
• Simplification of construction of certain objects of engineering and transport infrastructure under the conditions of martial law;
• Creation of prerequisites for comprehensive restoration of settlements (territories) that suffered as a result of the war.

The Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine Regarding the Simplification of the Procedure for Changing the Designated Purpose of Land to Attract Investments for Rapid Reconstruction of Ukraine” dated 6 February 2024 No. 3563-IX (the “Simplification Law”)

On 28 February 2024, the Simplification Law was officially published. The law:

• Allows changes to the designated purpose of land plots without developing urban planning and land management documentation in the absence of the developed urban planning documentation at the local level. This simplified approach will apply to land plots outside of the settlements for locating the following class of buildings and structures:

1. Industrial and warehouse buildings;
2. Non-residential agricultural buildings;
3. Pipelines, lines of electronic communication networks, and power transmission (except for main oil and gas pipelines);
4. Complex industrial facilities (except for buildings of enterprises engaged in the extraction, production and processing of nuclear materials, the enrichment and processing of nuclear fuel; the thermal treatment (incineration) of household waste; and nuclear power plants).

The simplified procedure will be in effect for five years from the date of termination of martial law in Ukraine or in the given locality.

• Allows changing the designated purpose of particularly valuable land and forest land plots in order to use them for purposes not related to forestry management, in case of location of power facilities (including technological infrastructure of power facilities).
• Provides for the development of a register of territories contaminated / likely contaminated by explosive objects.

The Simplification Law will enter into force three months after its publication, i.e. from 28 May 2024.

Source – https://www.dentons.com/en/insights/articles/2024/april/3/ukraine-adapts-construction-legislation-to-address-the-challenges-of-war

The Investment Guide by BDO in Ukraine serves as a vital platform for investors, delivering essential information about Ukraine’s reconstruction. It meticulously outlines key mechanisms and stages crucial for attracting investments, while also providing in-depth analyses of potential risks and effective strategies for their mitigation. The guide elaborates on investment opportunities spanning various economic sectors, placing special emphasis on international financing and export credit. Additionally, it furnishes specific recommendations for meticulously selecting investment projects. We anticipate that our guide will evolve into an indispensable tool for those eager to contribute to the ongoing restoration of Ukraine.

BDO in Ukraine experts have compiled useful tips and valuable information in one place for potential investors looking to invest and contribute to Ukraine’s Recovery today. The information in the Guide is regularly updated and supplemented with relevant materials on the topic.

Steps for investors

1. Consider the following valuable resources when identifying potentially interesting projects for investment

• Investment Opportunities Map of Ukraine, precented by European Business Association in Ukraine 
• Go to government investment promoting agency – UkraineInvest or Advantage Ukraine
• Systems responsible for the recovery of Ukraine
• Check UVCA initiatives Ukraine Redevelopment Platform, 1% Pledge or visit UVCA Investors Club
• Explore Investors guide to Ukrainian IT

2. Check your country

• Political and war risks mitigation possibilities 
• German Export Credit Guarantees – Simplified procedures for Ukraine 
• International Chambers of Commerce / Business Associations

3. If your investment requires establishing a Ukrainian legal entity, check Ukrainian initiatives, legislation and regulations for investors

• Taxation in Ukraine
• Diia.City –preferable tax regime for investments in IT Industry in Ukraine    
• Valuation of war damage
• Privatization process in Ukraine
• Financial state support programs
• The Law of Ukraine “On Industrial Parks” 
• Key legislative act regulating data protection in Ukraine
• Key points on prevention of money laundering in Ukraine
• Access to EU Finance
• Compensation for employers for hiring the unemployed persons and creating new workplaces
• Ukrainian E-Residency for Foreign Nationals
• Entry regime to Ukraine for foreign citizens
• Guide to electronic public procurement system in Ukraine

Disclaimer: Please note that this information is in effect as of the date of this document (23/03/2024)This publication is for informational purposes only and should not be construed as legal, tax, or financial advice. Please consult with a professional advisor for personalized guidance. 

Source – https://www.bdo.ua/uk-ua/ukraine-recovery-2/investments-in-ukraine