Defence Sector Update: Key Regulatory and Market Developments as of end-September 2026
Ukraine’s defence sector is adjusting to the gradual resumption of exports of military and dual-use goods after a long period of de facto restrictions. As of the end of September, several regulatory and market developments are worth noting: the entry into force of Order of the Ministry of Defence of Ukraine No. 297 of 20 August 2026, which establishes a new department responsible for the participation of the Ministry of Defence in export control procedures, the growing number of joint ventures under the Build with Ukraine programme, the first steps of the EU-Ukraine Drone Alliance; and the Defence Procurement Agency DOT’s new approach to procuring FPV drones.
Order of the Ministry of Defence No. 297: a dedicated department for weapons systems and technology development
On 20 August 2026, the Ministry of Defence of Ukraine issued Order No. 297 approving the Regulations on the Department for the Development of Weapons Systems and Technologies. The new Department is responsible for key stages of the weapons life cycle – from research and development and the formation of technical requirements to testing and adoption into service.
On export control, the Department for the Development of Weapons Systems and Technologies is entrusted, in particular, with the following tasks:
- reviewing matters related to granting business entities the authority to export and import military goods, as well as goods containing information that constitutes a state secret, and preparing proposals for the approval of the relevant draft resolutions of the Cabinet of Ministers of Ukraine;
- preparing proposals on whether a business entity may be granted an opinion allowing it to negotiate a foreign trade contract with a foreign counterparty, or whether there are grounds to refuse such an opinion;
- preparing and submitting proposals or conclusions of the Ministry of Defence on whether an international transfer of goods may take place, within the competence of the Ministry.
Order No. 297 determines the internal allocation of functions within the Ministry of Defence system and does not change the established procedure for obtaining permits for international transfers. Its practical impact will depend, among other things, on how quickly the Ministry of Defence prepares its positions in response to requests from the State Export Control Service.
Build with Ukraine: partnerships is growing, but production projects are still scaling up
According to Arsenal, citing the Ukrainian Council of Defence Industry, Ukrainian and European defence companies signed around 25 joint venture (JV) agreements under Build with Ukraine over the past year. At the same time, KSE Institute reports that some 41 further partnerships are in the pipeline. Overall, more than 180 B2B partnerships between Ukrainian and European companies have been recorded since 2022, most of them with partners from Germany, Denmark and the US.
One example of joint production is Quantum Tencore Industries, a JV between Germany’s Quantum Systems and Ukraine’s Tencore. After JV was created in February, production in Germany was launched in April, and in June, the company received an order for 2,000 TerMIT ground-based robotic systems for the Ukrainian Defence Forces.
In practice, however, such projects face a number of legal and regulatory issues. Among those that manufacturers have already encountered include the allocation of equity and roles between partners, export permits for transferring goods and technologies from Ukraine, as well as certain permits and requirements under the legislation of the country where production is based.
Ukrainian manufacturer Athlon Avia, for instance, has said that export restrictions prevented it from transferring the relevant technologies to its production site in Poland, so some components were developed locally.
Technology transfer under the special regime introduced by Resolution of the Cabinet of Ministers of Ukraine No. 875 of 1 July 2026 raises separate questions. According to the Resolution, the importing state must guarantee that the foreign entity will use the technologies without alienation of intellectual property rights. To obtain permission for entities to alienate exclusive intellectual property rights or sell technologies, the approval of the Interdepartmental Commission on the Policy of Military-Technical Cooperation and Export Control is required, which may lengthen the permit procedure.
For companies considering Build with Ukraine or other models of international production, these conditions directly affect the JV structuring, in particular the technology transfer model, intellectual property rights, and the possibility of further deliveries of products to third countries.
EU-Ukraine Drone Alliance: first meeting and focus on scaling up production
On 11 September 2026, the EU-Ukraine Drone Alliance held its first meeting in Brussels, bringing together 18 founding companies – nine from Ukraine and nine from the EU. The Alliance was launched in July as part of the EU-Ukraine Drone Deal. It aims to accelerate the development and production of drones and counter-drone systems, build partnerships, strengthen supply chains and support joint testing and innovation.
During the first meeting, European Commissioner for Defence and Space Andrius Kubilius outlined the Alliance’s key priorities: accelerating the creation of joint ventures between Ukrainian and European companies, opening up supply chains, expanding access to testing grounds, as well as resolving practical issues related to certification, access to components, intellectual property and the shortage of skilled workers. Participants also discussed creating dedicated drone production sites with simplified procedures, which could help scale up production in Europe quickly.
FPV drones for the Defence Forces: procurement by specification, not by models
The Defence Procurement Agency DOT has started a competitive procurement of radio-controlled FPV drones based on technical specifications, rather than specific models. The procurement is split into 269 lots, each defined by a combination of six parameters: frame size, availability of terminal homing, type of communication, camera type, video transmitter frequency, and signal receiver frequency.
Manufacturers can offer their own solutions as long as they meet the requirements of the relevant lot. To diversify supply, no single supplier may be awarded more than 50% of the total volume.
DOT-Chain Defence remains a separate channel of state demand. As of September 2026, the Defence Forces received 1,001,782 units of UAVs and other equipment for a total of UAH 71.1 billion through the marketplace. The system lets military units choose the equipment they need, while the state handles financing and organisational matters.
What this means for business
September’s developments show that the regulatory and market landscape of the defence sector continues to evolve rapidly. Order No. 297 defines which department of the Ministry of Defence prepares the Ministry’s positions on export procedures. Companies should build this stage into their timelines when planning export and international projects. Joint ventures and partnerships with European companies remain a promising direction, but their implementation requires careful legal structuring particularly regarding the allocation of equity, intellectual property rights and conditions for technology transfer, taking into account export controls requirements. The Defence Procurement Agency’s new approach makes the procedure more transparent and opens opportunities for manufacturers but requires attention to compliance with the technical requirements of lots.
Sayenko Kharenko’s team helps Ukrainian and foreign defence manufacturers to navigate export procedures without unnecessary delays, obtain the necessary permits, and structure joint ventures while meeting export control and intellectual property requirements.