Legislative Initiatives and Key Events in the fFeld of Subsoil Use

Ukraine’s subsoil use sector underwent significant regulatory changes in late 2025 and early 2026. Key developments include new draft laws to modernise the legal framework, updated model agreements for subsoil use[1], launch of an online portal for the U.S.-Ukraine Reconstruction Investment Fund (the Fund), and the first production sharing agreement (PSA) tender for lithium extraction.

These changes will directly impact how investment projects are structured, contractual obligations are defined, and legal instruments are selected.

In late November, two draft laws were registered aimed at updating the legislative framework for subsoil use:

Initiative 1 provides for the automatic extension of special permits for subsoil use and the terms for performing work for the period of martial law and an additional 24 months after its termination or cancellation. Under the current rules, this period is 6 months for permits that expired during martial law and 3 months for others.

Currently, there is no consensus among market participants on how to interpret permit extension rules after the termination or repeal of martial law.

Notably, where russia’s full-scale invasion disrupted project implementation – particularly when it led to operational suspension – current permit extension periods (3-6 months) are insufficient. Resuming operations and completing required work programs typically takes far longer. However, in our view, the wording proposed by Initiative 1 does not fully eliminate ambiguity in interpreting this provision of the Code on Subsoil of Ukraine.

Initiative 1 also addresses a long-standing market issue by setting out rules for auctions (electronic bidding) for special permits for subsoil use when only one participant is registered. Under these rules, a single participant can win by increasing their bid by the minimum increment above the starting price.  The closed bid, however, cannot be lower than the starting price of the lot. At present, an auction is considered void if fewer than two bids are submitted.

Additionally, the draft law proposes stability guarantees for users of strategic and critical mineral resources, protecting them from adverse legislative changes. Similar guarantees already exist for investors operating under production sharing agreements (PSA) and are partially reflected in extractive industry transparency legislation.

Initiative 1 also clarifies the rights of certain special permit holders to obtain extraction permits without going through an auction. Specifically, this right arises for holders of valid special permits for creating geological territories and sites of significant scientific, cultural, or sanitary-health importance (scientific testing grounds), provided they conduct geological studies and obtain approval of reserves and resources from the State Commission of Ukraine on Mineral Reserves at their own expense. Documents may be submitted regardless of the date of reserves and resources approval, but no later than 24 months from the law’s effective date.

Initiative 2 defines precise spatial boundaries for subsoil plots and oil/gas fields with coordinates. It also requires auction documentation to include information on environmental restrictions: nature conservation areas, cultural and world heritage sites, and coastal protection zones.

In practice, without such information, winners face restrictions or additional obligations on the site that complicate or even halt the implementation of the project.

Under the current version of the Law of Ukraine ‘On Oil and Gas’, when prospecting or exploration work is needed on an oil and gas bearing subsoil plot, the user of the oil and gas bearing subsoil for oil and gas production is sent a proposal to carry out such work. The user must agree or refuse in writing within one month. If the user refuses or fails to respond within one month, a competition is announced for a special permit to conduct such work on that plot.

Initiative 2 proposes to remove the provision establishing this mechanism. Instead, the Ministry of Economy, Environment and Agriculture of Ukraine, at the request of the Ukrainian Geological Survey, is responsible for approving the Rules for conducting seismic exploration work in oil and gas bearing subsoil areas, and the results of such work are to be recorded in the geological information catalogue.

Parallel to these legislative initiatives, the Ministry of Economy, Environment and Agriculture of Ukraine approved new versions of model agreements on subsoil use conditions in December 2025 (annexes to special permits). The updated agreements contain legally binding provisions reflecting US-Ukrainian agreements on attracting investment and developing the extractive industry. [MN1] [SK2] 

In July 2025, the Ministry of Environmental Protection and Natural Resources of Ukraine [MN3] [SK4] already amended the model agreements in connection with the aforementioned agreements. Thus, the summer amendments extended their scope to subsoil users, in particular by introducing the following obligations for any permit issued before 23 May 2025 if their permits were subsequently modified:

The new autumn edition of the agreements narrows this obligation: notification/reporting is required only if changes are made to the permit due to the discovery of new minerals from the list provided for in the Agreement on the Establishment of the Fund [4].

The following grounds for applying the new rules for attracting investment and selling minerals remain for holders of permits obtained before 23 May 2025:

In the previous version of the model agreements, the rules for attracting investment and selling minerals applied to all permits obtained after 23 May 2025, regardless of how they were granted. The new version narrows the focus to permits obtained through competitive procedures – auctions (electronic bidding) or PSA competitions. Permits granted without an auction (e.g., for certain local minerals, groundwater, therapeutic resources, underground constructions, or geological sites) are therefore not subject to the investment and mineral sale mechanisms designed for auction-based permits and PSA[5].[MN11] [SK12] 

The text of the agreements now specifies that financing of the project with funds received by the subsoil user from companies in its group (legal entities linked by control relationships – direct or indirect ownership of 50% or more of shares or interests, or the ability to control management) is not considered to be raising capital for the project. Accordingly, the rules on raising capital set out above will not apply in such cases.

Additionally, the rules on attracting investment and selling minerals, as set out in the model agreements, do not apply to natural gas if the subsoil user performs special obligations (PSO[6]) in the natural gas market in accordance with the law – for the term and scope of such obligations.

At the same time, the new version of the model agreements retains:

As mentioned in our previous publication, the Ukrainian government has also approved lists of strategic and critical minerals, creating a foundation for the priority development of relevant deposits and the application of special investment mechanisms.

Practical confirmation of these changes came with the results of the competition to conclude a PSA for the extraction and enrichment of metal minerals within the Dobra deposit. The competition was conducted in accordance with the Law of Ukraine ‘On the Ratification of the Agreement between the Government of the United States of America and the Government of Ukraine on the Establishment of a United States-Ukraine Reconstruction Investment Fund’. For the first time in Ukraine, the winner of the tender for the development of a lithium deposit was determined by  the PSA mechanism.

In January 2026, the Cabinet of Ministers of Ukraine (the Government of Ukraine) declared DOBRA LITHIUM HOLDINGS JV, LLC as the winner of the competition. Under the competition terms approved by the Government of Ukraine in August 2025, the company committed to a minimum investment of USD 179 million, including:

The Government of Ukraine has not yet signed a PSA with the winner of the tender for the development of the Dobra lithium deposit. At the same time, the Ministry of Economy, Environment and Agriculture of Ukraine has published on its website nine criteria for evaluating tender applications and materials. These published criteria allow potential participants in future tenders to understand which aspects the Interagency Commission responsible for concluding and overseeing production sharing agreements considers when assessing subsoil plots (excluding oil and gas-bearing sites).

Legislative initiatives, the revision of model subsoil use agreements, the launch of an online portal for submitting investment projects to the Fund, and the selection of a tender winner for a PSA on lithium extraction signal a significant shift in the regulation of subsoil use in Ukraine. Unlike the application of PSAs in the hydrocarbon sector prior to the full-scale aggression, this project represents the first use of this mechanism for strategically important minerals during wartime. Together, these developments create a refreshed framework for structuring investment projects, defining the contractual responsibilities of subsoil users, and choosing appropriate legal instruments – factors that market participants must consider when evaluating regulatory risks and planning operations in Ukraine’s extractive sector.

[1] Model agreement for a special permit – an annex to a special permit for subsoil use, approved by the central executive authority responsible for shaping state policy in environmental protection (the Ministry of Economy, Environment and Agriculture of Ukraine), and forming an integral part of the permit. The agreement sets out the conditions of subsoil use, compliance with which is supervised by the relevant authorities. Amendments to the agreement are only possible with the consent of the parties; however, in practice, the subsoil user does not have the right to make changes.

[2] Preparation of draft laws for the first reading in the Verkhovna Rada of Ukraine is currently underway

[3] The project includes all activities of the subsoil user related to the use of the subsoil plot provided for use for the purpose of prospective and/or actual use of the mineral specified in the permit and included in the list of ‘Assets related to natural resources’ in Appendix A to the Fund Agreement.

[4]  List of ‘Assets Related to Natural Resources’ in Appendix A to the Agreement between the Government of Ukraine and the Government of the United States of America on the Establishment of the U.S.-Ukraine Reconstruction Investment Fund, ratified by the Law of Ukraine dated 08.05.2025 No. 4417-IX ‘On Ratification of the Agreement between the Government of Ukraine and the Government of the United States of America on the Establishment of the U.S.-Ukraine Reconstruction Investment Fund’

[5] However, there is an exception when changes are made to the permit after 23 May 2025 due to the discovery of a new mineral resource from the list of ‘Assets Related to Natural Resources’ (Appendix A to the Fund Agreement).

[6] PSO (imposition of special obligations) – duties imposed by the Cabinet of Ministers of Ukraine on participants of the natural gas and/or electricity market for a specified period. These obligations are introduced in exceptional cases to ensure public (general economic) interests.