Ukraine Takes Another Shot at Foreign Investment Screening
Ukraine is once again moving towards establishing a foreign direct investment ("FDI”) screening regime. A new draft law has just recently been registered in Parliament, marking the second attempt to introduce a formal mechanism for reviewing foreign investments in sensitive sectors.
For now, the draft is only at the starting line. It will be making way through Parliament, where changes are not just possible, but likely. The timing and final shape of the law to be adopted is still uncertain. If passed, the law would become effective six months after publication and would not apply retroactively to deals already closed.
What’s in Scope?
The draft borrows its definition of "foreign investor” from existing legislation and casts a wide net: foreign companies, individuals without permanent residence in Ukraine, states and international organisations, as well as other entities recognised as foreign ones by Ukrainian law.
Screening would target investments into sensitive sectors such as:
Critical infrastructure (pipelines, power systems, water supply in major cities);
Extraction of strategic minerals (uranium, lithium, titanium, nickel, copper, zirconium, etc.);
Defence and dual-use industries (from tanks and aircraft to dual-use electronics).
Who Holds the Pen?
The Ministry of Economy (the Ministry) would lead the process, supported by a special Commission with representatives from the Security Service (SBU), Foreign Intelligence Service (SZR), and the Ministry of Foreign Affairs. Sector regulators may also be invited to the table. The State Service for Special Communications would monitor the market and flag suspect deals.
Triggers and Timelines
A notification would be mandatory if the investment results in:
At least 25% of voting rights, blocking rights, or ability to appoint key management/supervisory positions; or
Acquisition of assets worth 10% or more of the target’s book value.
The review clock could run up to 60 days for completeness and 90 days for substantive assessment, with possible extensions if other agencies are consulted.
Outcomes – Green Light, Amber, or Red
The Ministry is expected to have the right to:
Approve the deal;
Approve it with conditions; or
Block it outright.
And the red lines are clear: no approvals for investors with russian ties, sanctions history, russian citizenship, or russian property interests within the last two years. Providing false or incomplete information could result in suspension of voting rights, loss of dividends, and the transaction being declared invalid.
Sanctions for Non-Compliance
Failure to comply with the screening obligations may carry significant consequences. Under the draft, non-compliance could lead to:
Suspension of voting rights acquired through the transaction;
Deprivation of the right to receive dividends from the date of the transaction;
Invalidation of the transaction;
Monetary penalties, including a fine of up to 50% of the value of the foreign direct investment.
These measures underscore the seriousness with which the Ukrainian authorities intend to approach enforcement of the new regime.
Continuous Monitoring
This is not just about one-off approvals. The Ministry would also monitor investors by:
Maintaining and updating the Register of Foreign Investors;
Tracking ownership changes;
Analysing restrictions and risk factors set by the Government of Ukraine.
Why It Matters for M&A
The draft is tightly woven into merger control rules. The Antimonopoly Committee (the AMC) will not clear concentrations involving foreign investors in sensitive sectors unless the Ministry has already signed off on the investment. Pending merger reviews will be suspended until that happens. The AMC’s "tacit approval” rule will not apply without FDI clearance.
What’s Next?
This is only the second attempt. The first one stalled, and this draft may be reshaped significantly before it becomes law.
Timing is uncertain. The adoption path may be lengthy. Equally, it can be viewed as a priority and its adoption may take place soon.
Investors should prepare now. Those , who consider investments into Ukrainian critical infrastructure, natural resources, or defence-related sectors, should bear in mind potential additional clearance requirements, longer deal timelines, and heightened compliance risks.
In short: Ukraine is aligning itself with global trends by bringing national security front and centre in foreign investment policy. How exactly this regime will work in practice will depend on how the Parliament shapes the final text – but the journey’s direction is unmistakable.
Please do not hesitate to contact us if you need any further clarification on the upcoming FDI regime in Ukraine.