On 27 August 2026, the key provisions of Resolution of the Cabinet of Ministers of Ukraine No. 1051 dated 13 August 2026 “Certain issues of preparing public-private partnership projects and improving the public investment management process” (the Resolution No. 1051) entered into force. Resolution No. 1051 provides the secondary legislation needed to implement the new PPP model introduced by the Law of Ukraine “On Public-Private Partnership” No. 4510-IX.
Resolution No. 1051 approved the procedures for analysing the concept note and the effectiveness of implementing a PPP, introduced comprehensive changes to the public investment management system, and repealed the acts governing the previous state-private partnership analysis model.
New procedure for preparing PPP projects
For PPP projects, including concessions, the pre-investment stage now comprises: (i) a concept note prepared on the basis of a preliminary investment feasibility study; and (ii) a PPP feasibility study. The analysis of the concept note covers the strategic, economic, commercial, financial and managerial rationale, including a preliminary comparison of the project’s efficiency with and without the involvement of a private partner.
Projects with an expected value below the equivalent of EUR 5,538,000 are prepared under a single-stage PPP procedure, based on the concept note alone, without a separate PPP feasibility study. If a project was not classified as below-threshold at the concept-note stage, a subsequent reduction in its value does not change the applicable preparation procedure. For a below-threshold project involving state support from the state budget, the conclusion is agreed with the Ministry of Economy, with the involvement of the Ministry of Finance and the Ministry for Communities and Territories Development of Ukraine.
Engaging an advisor to prepare the concept note is mandatory if the project’s expected value exceeds the equivalent of EUR 10 million.
A negative conclusion on the use of the PPP model does not terminate the project itself: it can be continued as a public investment project from the investment feasibility study stage, using the materials already prepared.
PPP integrated into the public investment system
Special procedures apply to PPP projects, while the general procedure established by Resolution of the Cabinet of Ministers of Ukraine No. 527 applies only in expressly specified cases, in particular:
if the preliminary investment feasibility study indicates that a PPP is possible, the project, regardless of its value, is submitted for a sectoral (industry) assessment and, if the results are positive, is included in the relevant sectoral portfolio
for projects assessed before Resolution No. 1051 entered into force, the possibility of implementation on a PPP basis is additionally identified at the expert or sectoral assessment stage
a PPP project that requires budget financing to prepare the PPP feasibility study must be included in the relevant unified project portfolio in order to obtain such financing
Implementation, monitoring and DREAM
The procedure for implementing public investment projects and programmes has been set out in a new wording. It sets out in detail the readiness-for-implementation criteria, the roles of the initiator and the component executor, the reporting calendar, the performance evaluation, and the procedure for amending indicators during implementation.
DREAM becomes the digital basis for preparing and monitoring public investment and PPP projects. The necessary technical solutions must be rolled out within six months for public investment projects and no later than 1 April 2027 for PPPs (concessions).
Transitional rules for regions and communities
In 2026, local investment councils may include in unified project portfolios projects and programmes with confirmed sources of financing, provided they are consistent with the public investment areas set out in the medium-term plan of the relevant level. The Resolution also provides regional and local authorities with the technical ability to independently define such areas on the basis of strategic planning documents.
Practical implications
Resolution No. 1051 makes the new PPP model operational and links PPP preparation to the entire public investment management cycle. Initiators and public partners should, from the very outset, coordinate the preparation of the concept note, the sectoral assessment, the project’s inclusion in the portfolios, the need for budget financing, and the entry of data into DREAM.
Ukraine has adopted a new, simplified procedure for the export of military goods, dual-use goods and defence technology to partner countries. For Norwegian defence companies wishing to procure Ukrainian drone technology, enter into co-production agreements or licence Ukrainian defence solutions, this presents new opportunities – but also challenging regulatory conditions. For investors in the Ukrainian defence industry, export capacity is a key value driver that now has a legal framework. This article reviews the main features of the new regulations and highlights the practical implications for Norwegian stakeholders.
Ukraine has implemented a number of changes to its regulatory framework for the defence industry, both to strengthen the sector commercially and to facilitate cooperation with international players. The latest development is the adoption of Resolution No. 875 by the Cabinet of Ministers of Ukraine (CMU), which introduces a simplified procedure for the export of military goods, dual-use goods and related technologies from Ukraine. The resolution came into force upon its publication on 8 July 2026.
Whilst Norwegian defence companies have traditionally been suppliers to Ukraine, the current cooperation also makes Norway a buyer and co-production partner for Ukrainian defence technology, particularly in the fields of drones and electronic warfare. It is the Ukrainian exporter who must obtain authorisation under these regulations, but the timelines, conditions and risks involved in the Ukrainian authorisation process directly affect Norwegian purchasers’ ability to receive goods and technology.
The procedure is temporary. It applies expressly for the duration of Ukraine’s state of emergency (martial law), which has been in force since Russia’s full-scale invasion in February 2022, and for six months following its expiry or revocation. Industry players and investors relying on this regulatory framework must therefore be mindful of the uncertainty regarding whether, and if so how, the regime will be continued following a future peace settlement.
The new procedure must be viewed in the light of previously introduced modernisations to Ukraine’s regulatory framework, including the so-called ‘Drone Deal’ initiative and the ‘Defence City’ scheme – most specifically in the context that the new, simplified processes apply to countries that have been pre-approved by Ukraine’s Ministry of Foreign Affairs under a so-called Drone Deal agreement.
Who can use the new procedure
The new simplified procedure can be used by two categories of importers, namely:
By importers from the countries that are parties to bilateral agreements with Ukraine entered into under the “Drone Deal” framework; and
By importers from any other country included into a list of eligible countries as approved on a quarterly basis jointly by the Ukrainian MFA and the special governmental commission on the military technological cooperation and export control policy. The MFA will take into account positions and views of the Ukrainian Ministry of Defence, State Security Service of Ukraine, and the Foreign Intelligence Service of Ukraine. So far no such list has been approved and/or published, but this is to be expected some three weeks after the introduction of the new procedure.
The “Drone Deal” initiative is a series of bilateral agreements between Ukraine and selected partner countries, which facilitate cooperation relating to the development, production, exchange of technology and use of military technologies and products – not limited to drone technology, despite the name. According to open sources , as of July 2026, Ukraine has entered into formal ‘Drone Deal’ agreements with, amongst others, Latvia, Lithuania, the Netherlands, Estonia, Denmark, Saudi Arabia, the United Arab Emirates and Qatar.
Norway has not been formally announced as a party to such an agreement, but in connection with the signing of the declaration of cooperation between Støre and Zelenskyy in Oslo on 14 April 2026, Zelenskyy stated that this was a “first step towards a Drone Deal”. Later that same month, Norway and Ukraine signed a framework agreement under the “Build with Ukraine” initiative, focusing on the production of Ukrainian drones in Norway.
Whether these agreements will be deemed sufficient under Article 5 of the resolution remains unclear, but given the close cooperation between Norway and Ukraine, it is reasonable to expect that Norway will be included on the MFA list.
The ‘Defence City’ scheme is a purely domestic Ukrainian scheme (introduced by Laws Nos. 13420 and 13421, in force from January 2026) which grants eligible Ukrainian defence companies tax benefits and simplified procedures. ‘Defence City’ status is not a prerequisite for using the simplified procedure set out in Resolution No. 875 – the procedure is open to all registered Ukrainian exporters who export to ‘Drone Deal’ partner countries.
Defence City is nevertheless relevant to Norwegian stakeholders in two respects: (i) Ukrainian suppliers with Defence City status may enjoy additional benefits that make them more competitive, and (ii) investors in the Ukrainian defence industry should investigate whether the target company holds or qualifies for Defence City status, as this affects the company’s tax position and overall valuation.
Which goods are covered by the new procedure
The new regulations apply alongside the existing regulations on export licences and cover both military goods and dual-use goods. Military goods are products specifically developed for military purposes, such as weapon systems, ammunition and military equipment. Dual-use goods are products that have civilian applications but can also be used for military purposes, such as certain types of electronics, software, sensors and navigation technology. The procedure also covers technology transfers and transactions relating to intangible assets. A minimum value of UAH 15 million has been set for exports of finished defence products, which corresponds to approximately NOK 3.4 million as at today’s date.
Components and accessories (“складові частини” and “комплектувальні вироби”) are exempt from the value threshold and are subject to the procedure regardless of the contract value.
What is the essence of the simplified procedure?
Processing time and deemed approval
SECSU (State Export Control Service of Ukraine), Ukraine’s export control authority, must make a decision on an export licence within 30 calendar days of receiving an application, down from 90 days under the standard regulations. During this period, parallel consultations take place: the Ministry of Defence has 20 calendar days (10 days for technology exports) and the SBU, the Foreign Intelligence Service and the Ministry of Defence’s intelligence agency have 15 calendar days to provide their assessment. If these bodies do not respond within the deadlines, their approval is deemed to have been given by tacit consent (‘deemed approval’). Note that this rule on deemed approval does not apply to SECSU itself – SECSU must actively approve or reject the application within the 30-day deadline.
Implementation of the procedure
The Ukrainian Ministry of Foreign Affairs is required to maintain a list of countries approved for the procedure, whilst the Ministry of Defence maintains a list of critical goods and technologies where exports could harm Ukraine’s defence capabilities. Both lists are updated quarterly and approved by the Inter-Ministerial Commission for Military-Technical Cooperation and Export Control. Exports to countries that do not qualify, of critical technology or which otherwise raise national security concerns, fall outside the scope of the simplified procedure and will require further scrutiny in accordance with the underlying export control regulations.
Although the procedure has been simplified, several control mechanisms remain in place: mandatory consultation with the SBU and the intelligence services, quarterly updates to the list of critical goods, requirements for state guarantees from the importing country, and the possibility of cancellation with 72 hours’ notice.
Norwegian operators should nevertheless carry out their own integrity and due diligence assessments of Ukrainian counterparties, in line with good practice for defence sector transactions and Norway’s obligations under the OECD Anti-Bribery Convention.
Payment mechanisms and additional charges on re-export
The new procedure also includes fees payable to the Ukrainian authorities in connection with the export of covered goods and technology.
When exporting stand-alone (finished) goods, whether military or dual-use, a fee equivalent to 20% of the value of the goods is payable.
For components and accessories, a fee equivalent to 30% of the value of the goods is payable.
When exporting technology, not goods, a fee equivalent to 20% of the value is payable – where the value is to be set at either the actual selling price over the last six months or, where this is not possible, on a calculated basis.
In the case of re-export to third countries of goods produced using technology transferred to foreign entities, a fee of 20% of the value of the goods is payable.
The duties are due at the time of application, and proof of payment must be attached to the application. The resolution does not provide for the refund of fees if an export licence is refused – which entails a not insignificant commercial risk, particularly given that the Ministry of Defence may invoke priority for its own defence needs as grounds for refusal (see section 4.4 below).
State guarantees from the importing country
An application for an export licence must be supported by a guarantee document from the authorities of the importing country. In the case of technology transfers, the guarantee must, amongst other things, cover that (i) the technology is provided solely as a right of use, not as a transfer of intellectual property rights, (ii) re-export, sale or temporary export requires prior approval from SECSU, (iii) production shall only take place in the quantities and on the terms set out in the contract; and (iv) all upgrades, improvements or further developments must be reported and transferred back to Ukraine.
For Norwegian buyers, the practical challenge will be to secure such guarantees from the Norwegian government. This requires the involvement of the Ministry of Defence and, where appropriate, the Ministry of Foreign Affairs, and should be treated as a prerequisite for the transaction – not a formality that can be sorted out afterwards. The obligation to report on improvements is particularly relevant for co-production and licence agreements, as in practice it means that Norwegian partners must share the results of their own R&D based on Ukrainian technology.
Due diligence requirements for foreign operators
The procedure imposes strict requirements on foreign importers, end-users, intermediaries and other parties involved, in terms of identity, ownership and end-use.
Norwegian companies and funds should therefore expect that SECSU and Ukrainian exporters will require comprehensive KYC documentation, information on beneficial ownership and sanctions screening, including confirmation that no part of the ownership chain is linked to Russian or Belarusian persons or entities subject to sanctions. A thorough internal review should be carried out before negotiations commence.
Suspension and cancellation of licences
The regulatory risk does not cease upon the issue of an export licence. Licences may be suspended in the event of, amongst other things: (i) breach of the foreign importer’s obligations under government defence contracts, (ii) failure to pay duties, or (iii) notification from the Ministry of Defence of its intention to procure the goods in question itself (suspension limited to 30 days).
Furthermore, licences may be cancelled in the event of, amongst other things: incorrect information in the application, sanctions against any of the parties, breach of the licence conditions, breach of the importing country’s state guarantees, or intelligence information regarding the risk of deviant end-use or unauthorised re-export.
Contracts with Ukrainian suppliers should therefore address the consequences of suspension and cancellation, including payment milestones, delivery delays, the right of termination and limitations of liability.
Practical recommendations for Norwegian stakeholders
Norwegian defence companies and investors considering transactions relating to Ukrainian defence technology should, amongst other things, consider the following measures:
Initiate dialogue with the Norwegian authorities at an early stage. The requirement for state guarantees from the importing country cannot be met by the private buyer alone. Initiate dialogue with the Ministry of Defence and, where appropriate, the Ministry of Foreign Affairs at an early stage.
Carry out an internal KYC assessment. Confirm that the entire ownership chain is free from any links to Russian or Belarusian individuals. For funds: also assess whether the LP base, GP structure or other partners contain exposure that could create challenges.
Assess the commercial implications of the fee structure. The fees of 20-30% of the contract value, which are due at the time of application with no statutory right to a refund in the event of rejection, must be factored into pricing models and margin calculations from the outset. In the case of co-production or licence agreements, the 20% fee on re-export to third countries must also be taken into account.
Incorporate regulatory risk into the contract. Contracts with Ukrainian suppliers should address the risk of delays, suspension, refusal and cancellation of export licences, as well as Ukraine’s priority right of procurement.
For investors: carry out targeted due diligence. Investigate whether the target company has ‘Defence City’ status, existing export licences, any breaches under government defence contracts, and exposure to the list of critical goods. Also assess how the time limit on the procedure affects the value of export-driven revenue.
Carry out integrity and due diligence assessments. Norwegian entities have independent obligations under Sections 387-389 of the Penal Code and the OECD Anti-Bribery Convention. Carry out your own integrity due diligence on Ukrainian counterparties, irrespective of the Ukrainian authorities’ assessments.
The new export regime represents a significant development for Norwegian-Ukrainian defence cooperation. The framework creates genuine commercial opportunities, particularly in the fields of drones, electronic warfare and related technologies. At the same time, the procedure is conditional and subject to controls – it is not a free-trade regime. Norwegian operators who engage at an early stage with both Ukrainian and Norwegian authorities, carry out thorough internal assessments and build appropriate risk allocation into their contracts will be best positioned to benefit from this new framework.
What standard contract forms, if any, are used for construction and design? Must the language of the contract be the local language? Are there restrictions on choice of law and the venue for dispute resolution?
In Ukraine, there is no standard mandatory form of a construction contract. “The General Conditions for Conclusion and Performance of Capital Construction Contacts” approved by the Resolution of the Cabinet of Ministers of Ukraine No. 668, dated 1 August 2005 (Regulation No. 668), provides recommended terms and conditions of construction contracts in capital construction, which the parties may deviate from provided the provisions of the contract do not contradict imperative (mandatory) provisions of Ukrainian law. Regulation No. 668 provides that the general conditions should be “mandatorily taken into consideration” irrespective of the sources of construction funding or the form of ownership of an employer or a contractor.
Regulation No. 668 does not provide for a binary structure of a construction contract – there are no references to particular conditions such as in International Federation of Consulting Engineers (FIDIC) contracts. It is more common in Ukraine to have a construction contract drafted as a single document, without splitting it into General Conditions and Particular Conditions as in the case with FIDIC.
According to Regulation No. 668, the construction contract should contain the following material terms to be valid:
name and details of the parties;
date and place of execution of the contract;
subject matter of the contract;
contract price;
terms for commencement and completion of work;
rights and obligations of the parties;
instruments to secure the fulfilment of obligations under the contract;
terms and conditions of insurance covering the risk of accidental destruction or damage to a construction object;
order of procurement of design documentation, resources and services required for the performance of works;
order of engagement of subcontractors;
requirements for the arrangement of works;
order of employer’s supervision over the quality of resources;
terms for conduction of author’s and technical supervision with respect to construction works;
sources and order of financing of construction works;
payment procedure;
procedure of handover of completed construction works/construction object;
guarantee terms regarding the works and object, remedy of defects;
parties’ liability for the violation of the contract;
disputes resolution procedure; and
grounds and procedure for amendment of the contract and its termination.
Template forms of contracts such as FIDIC may be used subject to their alignment with Ukrainian imperative law provisions.
The language of business documentation, social and economic relations as well as agreements shall be the official state language (ie, Ukrainian). At the same time, the current legislation does not prohibit concluding bilingual contracts, which are widely used in international contracts (contracts with a foreign element).
Provided that the construction contract contains a foreign element (either party is a foreign entity), the contract may be governed by a foreign law and the parties may apply for disputes resolution either to Ukrainian courts or international arbitration institutions, subject to the agreement of the parties. As a matter of practice, construction contracts concluded as a result of public procurements are usually governed by Ukrainian law at the request of the customer.Payment methods
How are contractors, subcontractors, vendors and workers typically paid and is there a standard frequency for payments?
Payments under construction, supply and services contracts are normally made by wire transfer. The National Bank of Ukraine limits the amount of cash settlements per day to 10,000 hryvnias between business entities, 50,000 hryvnias for individuals (including both transactions between individuals and between a business entity and an individual). Non-cash payments shall be made through banks and non-bank payment service providers where the respective accounts are opened. Payment procedures as well as the payment schedule are subject to the agreement of the parties.Contractual matrix of international projects
What is the typical contractual matrix for a major project in your jurisdiction in terms of the contractual relationships among the various construction project participants? For example, do owners contract directly with contractors or do they contract through construction managers to trade contractors? Are any of the relationships legally defined?
As a matter of practice, employers in Ukraine usually conclude contracts for design works and construction works directly with certified designers and licensed contractors. For the small scale projects, employers usually engage a designer and multiple contractors, each responsible for separate work packages. For large-scale projects, employers engage a general contractor, who then hires subcontractors for relevant packages of works and manages construction. The general contractor may be responsible only for construction works based on the design documentation provided by the employer (eg, similar to the FIDIC Red Book contract) or perform both design and construction works (eg, similar to the FIDIC Yellow Book contract).
Engaging an engineer (eg, with the functions as provided, such as in the FIDIC Red, Yellow or Harmonised MDB edition) is not a widespread practice in Ukraine. Nevertheless, an engineer is often engaged in large-scale international contracts or contracts involving financing from international financial institutions.
In Ukraine, certain relationships among construction project participants are legally defined and regulated by Civil Code, construction-related and public procurement laws. These regulations set out the rights, obligations and responsibilities of the various parties involved in a construction project. Below are the main legal aspects defining relationships in construction projects:
The relationship between the employer and the contractor is primarily governed by the Civil Code of Ukraine and the Law on Regulation of Town-Building Activities and are typically formalised through a construction agreement, which defines the scope of work, deadlines and payment terms.
The relationship between the general contractor and subcontractors is governed by the Civil Code of Ukraine, the Law on Regulation of Town-Building Activities and a subcontract agreement. The subcontract defines the work to be performed by the subcontractor, terms of payment and scope of responsibilities.
The relationship between suppliers/vendors and contractors is typically based on supply contracts and governed by the Civil Code of Ukraine and the Law of Ukraine “On Public Procurement” (if applicable). Supply contracts govern the provision of materials, equipment and other resources required for the project.
For public construction projects, relationships between the state (public body) and contractors are governed by the Law of Ukraine “On Public Procurement“, which mandates competitive bidding, transparency and fair treatment for all contractors, both local and foreign. The law also defines the framework within which the state contracts for construction services, including the requirements for tendering, contract awards and execution of works.
PPP and PFI
Is there a formal statutory and regulatory framework for PPP and PFI contracts?
Ukraine has a regulatory framework for PPPs and concessions. It was significantly updated in 2018 and is still being improved. The Ukrainian PPP regulatory framework was developed in consideration of best international practices and currently includes over 20 laws and by-laws, including the following key legislation:
Are all members of consortia jointly liable for the entire project or may they allocate liability and responsibility among them?
Ukrainian law does not provide for the joint and several liability of the consortium members. Unless Ukrainian law directly provides for joint and several liability, the parties of the contract are free to agree on joint and several or joint shared liability of the consortium members.
In large-scale projects, employers prefer having a general contractor that is liable for the management, timely and proper fulfilment of all works.Tort claims and indemnity
Do local laws permit a contracting party to be indemnified against all acts, errors and omissions arising from the work of the other party, even when the first party is negligent?
Under Ukrainian law, the general contractor is liable for the proper performance of construction works under the construction contract, regardless of whether such works were performed by the general contractor or by a subcontractor. A general contractor is liable to the employer for non-fulfilment or improper fulfilment of obligations by its subcontractors, regardless of the subcontractor’s fault.
At the same time, a party that breaches its obligations (eg, subcontractor) shall compensate damages to another party (eg, general contractor), unless it proves that the breach of the obligation occurred through no fault of his or her own. Therefore, the general contractor may file a regress claim to its subcontractor.Liability to third parties
Where a contractor constructs a building that will be sold or leased to a third party, does the contractor bear any potential responsibility to the third party? May the third party pursue a claim against the contractor despite the lack of contractual privity? Can a contractor’s liability to contracting parties and others be limited by contract or law?
The contractor is liable to the employer or developer for the quality of works within the warranty period established by the contract or law and shall remove any defects in the building within the warranty period. A third party who purchased a building from the employer or developer (first purchaser) has the right to file a claim with regard to the defects of such building to the employer/developer, which will then have a right to file a regress claim to the contractor within the statute of limitation. If the first purchaser is to further sell the building to another person, such new purchaser will have no right of claim to the employer or developer.
A contractor’s liability to contracting parties and third parties can be limited by contract, except in cases involving gross negligence or wilful misconduct, harm to life or health, or personal injury. Ukrainian law allows parties to agree on liability caps, limitation periods and exclusions of indirect or consequential damages.Insurance
To what extent do available insurance products afford a contractor coverage for: damage to the property of third parties; injury to workers or third parties; delay damages; and damages due to environmental hazards? Does the local law limit contractors’ liability for damages?
The above risks may be covered by the following insurances available in Ukraine:
insurance of construction risks, including insurance against accidental damages to the property of third parties;
third-party liability insurance, which covers liability for the damages to the property or health of third parties;
professional indemnity insurance, which allows parties to ensure against losses unintentionally caused to third parties in the course of professional activities as a result of unintentional professional error (omission, negligence) or other events stipulated by the insurance contract;
environmental liability insurance; and
accident insurance, including an industrial injury and occupational illness of employees.
Under Ukrainian law, the damages and losses (direct losses and lost profit) shall be reimbursed in full unless liability is limited by the law or contract. Ukrainian law does not limit the contractor’s liability for damages. At the same time, the law prohibits limiting liability for the intentional breach of obligations.
Ukraine is launching a special mechanism for the controlled export of Ukrainian weapons and defence technologies to partner countries under the Drone Deal format. The new rules are intended to create a more predictable model for Ukrainian defence manufacturers to enter international markets, while preserving the priority of meeting the needs of Ukraine’s Defence Forces.
The introduction of this mechanism forms part of a broader state policy aimed at developing Ukraine’s defence-industrial complex, attracting additional financial resources, scaling up production, and strengthening international defence cooperation. In this context, the National Security and Defence Council of Ukraine has previously emphasised that controlled export should be applied only provided that the unconditional priority of the needs of the security and defence sector is maintained.
Overview of the Changes: What the New Mechanism Provides For
The policy does not provide for the removal of export restrictions but instead introduces a special controlled regime under which the state will retain decisive influence over the key parameters of export: the list of permitted goods and technologies, the range of partner countries, the terms of supply, and the subsequent use of Ukrainian defence products.
Export will be permitted to designated partner countries under the Drone Deal format. Under this policy, manufacturers will be able to work with them directly. At the same time, each contract will be reviewed both from the perspective of Ukraine’s defence needs and in terms of technology control.
Among the key features of the new mechanism, several important points can be highlighted:
export applications are expected to be reviewed within up to 30 days, which should provide manufacturers with relatively swift access to foreign markets
a minimum threshold of UAH 15 million will be established for contracts involving finished products, while no such limitation is envisaged for the export of components
part of the funds from export transactions will be allocated to a special fund of the state budget as a contribution to the development of the defence-industrial complex
the state will separately determine the list of countries to which Ukrainian defence products may be supplied
a list of critical goods and technologies that will not be subject to export will also be created
control will be introduced over the use of Ukrainian technologies, including with respect to their further re-export or transfer to third parties
The new mechanism should also be considered separately in connection with the Defence City regime (see also: “Law on special legal regime for defence industry enterprises ‘Defence City’ has been adopted”). For defence industry manufacturers that have obtained or plan to obtain Defence City resident status, controlled export may become an additional element of a broader regulatory model combining special tax, customs, currency control, and export control conditions with the possibility of expanding production and developing international defence cooperation.
Export as a tool for financing the defence industry
One of the key ideas of the mechanism is to make export not only a source of revenue for businesses, but also a tool for supporting the entire industry.
Part of the funds from export contracts will be allocated to a special fund: 20% from the export of finished products and technologies, and 30% from the export of components. In this way, the state is effectively integrating export into the financing model of the defence industry.
For companies, this means that an export contract should immediately be viewed more broadly than an ordinary foreign economic transaction. The contributions will affect the economics of the deal, from pricing to payment structure and financial planning.
Priority of defence needs
The opening of export opportunities does not create an automatic right to export: the state will retain the ability to refuse approval of a transaction.
If the products are needed by the Defence Forces or are included in the list of critical goods, an export permit may not be granted. Lists of such goods will be formed and regularly updated, and the range of countries with which such transactions are possible will also be determined.
For businesses, this means that the risk of refusal to approve an export should be taken into account as part of the regulatory model. Therefore, already at the stage of negotiations with a foreign partner, it is advisable to assess not only the commercial parameters of the contract, but also the potential sensitivity of the products for the state and the needs of the security and defence sector.
Accelerated process without reducing oversight
The declared timeline for reviewing applications up to 30 days should be noted separately. If this timeline is observed in practice, it may increase the predictability of the export process for Ukrainian manufacturers and their foreign counterparties.
At the same time, speed does not mean simplified requirements. End-user verification, compliance with export control rules, and sanctions compliance will remain in place.
Therefore, companies should prepare in advance by having a clearly described product, confirmed production capabilities, a transparent ownership structure, and a clear model for the use of technologies.
Intellectual property and re-export control
A separate focus of the mechanism is the protection of Ukrainian technologies. The transfer of technologies is permitted, but without the assignment of intellectual property rights and with clear restrictions on their use.
Re-export or transfer to third parties is possible only with the approval of the Ukrainian side. If products created on the basis of Ukrainian technologies are subsequently sold to other countries, part of their value must also be transferred to the budget.
In this model, intellectual property becomes not merely a technical contractual issue, but one of the central elements in structuring export contracts in the defence industry.
It is particularly important to:
clearly define who owns the rights to technologies and developments
limit the ways in which they may be used by the partner
provide for a prohibition on unauthorized copying or transfer
regulate matters related to subcontractors and production partners
set out the rules for re-export and liability for their violation
What this means for manufacturers
The new mechanism creates real opportunities for Ukrainian companies, from scaling up production to entering new markets and attracting investment.
At the same time, it also raises the requirements for businesses’ overall preparedness. Participation in such export operations requires not only a product, but also a well-established legal and compliance infrastructure.
Before entering export markets, companies should check:
whether they can simultaneously perform state and export contracts
whether intellectual property rights have been properly formalised
whether a complete set of technical and permitting documentation is available
whether the products fall under restrictions as critical goods
whether the partner meets the requirements applicable to partner countries
whether budget contributions have been taken into account in the financial model
whether the necessary sanctions and export control checks have been carried out
Key takeaways for the defence market
The controlled export mechanism is an attempt to balance between two objectives: giving businesses an opportunity to grow while maintaining full control over critical resources.
Success in export markets will depend not only on the technological level of the products, but also on how prepared the company is to operate under enhanced regulatory oversight, properly structure export contracts, confirm its production capabilities, and ensure the protection of defence technologies.
