Please click "+" to expand an answer
Authors: Oleg Alyoshin, Vsevolod Mazurenko, Yulia Adamovych, Taisia Poetova
Foreign investment
What is the prevailing attitude towards foreign investment?
Ukraine has consistently demonstrated a welcoming attitude towards foreign investment, recognising it as a crucial driver for economic growth, modernisation, and integration into the global economy. Legally, this positive stance is embodied in a comprehensive framework designed to protect foreign investors and provide a stable, transparent, and favourable investment climate. The primary legislation governing foreign investment includes the following:
- the Constitution of Ukraine
- investment laws (Law of Ukraine 'On the Regime of Foreign Investment', Law 'On Protection of Foreign Investments in Ukraine' and Law 'On State Support for Investment Projects with Significant Investments in Ukraine'); and
- bilateral investment treaties (BITs).
Ukraine's legal system provides a structured framework to regulate foreign investments, ensuring both the protection and promotion of investor rights. Key components include the following:
- non-discrimination principle: foreign investors are granted national treatment, meaning they are treated no less favourably than domestic investors;
- expropriation protections: expropriation is prohibited unless in exceptional cases for public necessity, under due legal process, and with prompt, adequate compensation;
- repatriation rights: investors have the right to freely repatriate profits, dividends, and capital, subject to compliance with Ukrainian currency regulations;
- legal stability clause: guarantees that changes in legislation will not adversely affect foreign investments for 10 years from the date of their introduction; and
- dispute resolution mechanisms: investors can seek recourse through domestic courts or international arbitration under BITs, offering multiple avenues for resolving conflicts.
Ukraine has entered into numerous BITs with more than 70 countries. These treaties typically provide the following:
- fair and equitable treatment (FET): ensuring a stable and predictable legal environment;
- most-favoured-nation (MFN) treatment: preventing less favourable treatment compared to investors from other countries; and
- dispute resolution mechanisms: allowing investors to settle disputes through international arbitration (eg, ICSID, UNCITRAL).
Additionally, Ukraine is a signatory to multilateral agreements that impact foreign investment such as the Energy Charter Treaty, which facilitates investments in the energy sector and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), which provides a framework for resolving investment disputes.
While there is cautious optimism regarding foreign investments in Ukraine due to the prospects of a post-war reconstruction, recent increases in foreign direct investment (FDI), and government initiatives to attract capital, significant challenges related to security risks and regulatory instability persist. The World Bank estimates that Ukraine's economic recovery will require over US$400 billion, highlighting the urgent need for substantial foreign investment to rebuild infrastructure and stimulate growth. Achieving this will depend on improving the overall investment climate.
What are the main sectors for foreign investment in the state?
The main sectors attracting foreign direct investment in 2024 include the following:
- Energy and renewables: this sector remains a priority due to Ukraine's vast natural resources and the ongoing transition towards sustainable energy solutions.
- Information technology (IT) and software development: Ukraine's IT sector is one of the most dynamic and rapidly growing industries, renowned for its highly skilled software developers and competitive costs. The country has established itself as a significant hub for outsourcing, software development, and tech innovation.
- Agriculture and agribusiness: Ukraine is one of the world's leading agricultural producers, excelling in the cultivation of grains, sunflower oil, and other key commodities. The sector offers vast opportunities for investment in farming, processing, and export-oriented agribusiness.
- Manufacturing and heavy industry: Ukraine's manufacturing sector encompasses machinery, automotive, aerospace, and metallurgy. The industry's growth is supported by a robust industrial base and access to skilled labour, making it a prime target for foreign investors.
- Infrastructure and construction: investments in infrastructure, including transportation networks, ports, and logistics hubs, are crucial for Ukraine's economic integration and growth. The modernisation of highways, railways, and ports presents substantial investment opportunities.
- Mining and natural resources: Ukraine is rich in natural resources, including iron ore, coal, manganese, and rare earth metals. The mining sector offers lucrative opportunities for exploration, extraction, and processing activities.
- Pharmaceuticals and medicine: this sector has seen interest from foreign investors looking to capitalise on Ukraine's growing healthcare needs and potential for pharmaceutical production.
Is there a net inflow or outflow of foreign direct investment?
Recent data from the National Bank of Ukraine show that in the first five months of 2024, Ukraine attracted net FDI inflows of US$2.2 billion, of which US$1.5 billion were reinvested earnings. This represents a slight increase compared to the same period in 2023 when FDI inflows amounted to US$2.1 billion. By the end of the first quarter of 2024, the cumulative volume of FDI in Ukraine reached US$55.8 billion. The significant share of reinvested earnings indicates a high level of confidence among existing foreign investors in the Ukrainian market.
Investment agreement legislation
Describe domestic legislation governing investment agreements with the state or state-owned entities.
Investment agreements with the state or state-owned entities in Ukraine are governed by a comprehensive legal framework designed to regulate investment activities, protect investor rights, and promote economic development. This framework comprises several key legislative acts outlining the procedures, rights, obligations, and protections for both domestic and foreign investors engaging in agreements with the state or state-owned entities. Below is a detailed description of the primary laws and regulations governing such investment agreements in Ukraine.
Primary legislation governing foreign investment
- The Law of Ukraine 'On Investment Activity' (No. 1560-XII, 18 September 1991) establishes the basic conditions and principles for investment activities in Ukraine and provides the legal basis for investment agreements; offers additional safeguards, including compensation for losses due to unlawful actions by state bodies and protection in the event of changes in legislation that negatively affect investors.
- The Law of Ukraine 'On the Regime of Foreign Investment' (No. 93/96-ВР, 19 March 1996) outlines the legal regime for foreign investments, including types of investments, implementation forms, and regulations for enterprises with foreign investment. This law establishes the general principles governing foreign investments, ensuring equal treatment of foreign and domestic investors. It guarantees protection against discrimination and unlawful expropriation and provides rights to repatriate profits.
The 'Investment Nannies' law
The Law of Ukraine 'On State Support for Investment Projects with Significant Investments in Ukraine' (Law No. 1116-IX) (also known as the law 'On Investment Nannies'): Enacted in 2020, this law aims to attract significant investments by providing state support to large investors. The law applies to investment projects with significant investments that meet specific criteria and are implemented in priority sectors of the economy. The Law 'On State Support for Investment Projects with Significant Investments in Ukraine' offers incentives such as tax benefits, customs duty exemptions, and assistance in obtaining permits and assigns an 'investment nanny' (special manager) to facilitate interactions between the investor and state authorities. An eligible investor must enter into a direct investment agreement with the government of Ukraine, represented by the Cabinet of Ministers. The law provides that investors are protected from adverse changes in legislation regarding tax rates, customs duties, and other regulatory measures related to the investment project for the duration of the investment agreement. Investors have the right to refer disputes to international arbitration institutions as agreed in the investment agreement. Investors are granted access to Ukrainian courts and legal protections under domestic law.
Public-private partnership legislation
For public-private partnerships, the key legislation is the Law of Ukraine ‘On Public-Private Partnership’ (No. 2404-VI, dated 1 July 2010), which establishes the organisational and legal framework for cooperation between private partner (investor) and state partners (Ukraine or relevant state and local authorities).
Public-private partnerships are used in various sectors, including the following:
- energy (natural gas, heat, and electricity production, transportation, and supply);
- infrastructure (construction, water management, waste disposal);
- social services (healthcare, education, tourism, culture, and sports);
- innovation and technology (energy-saving technologies, electronic communications);
- housing (including temporary housing for internally displaced persons);
- cultural heritage management; and
- blood donation and related services.
Key provisions include the following:
- PPP agreement types: includes concessions, joint activities, property management agreements, and other contractual forms, excluding production-sharing agreements.
- Selection procedure: establishes transparent competitive procedures for selecting private partners.
- Risk allocation: defines the distribution of risks between the public and private partners.
- Government support: allows for state support measures, such as guarantees, co-financing, and other incentives.
Law of Ukraine 'On Concessions'
The Law of Ukraine ‘On Concession’ (No. 155-IX, 3 October 2019) specifically governs concession agreements, a form of PPP where the state grants rights to a private entity to operate and manage state-owned assets or services. This law outlines procedures for selecting concession operators and provides fair treatment and stabilisation guarantees.
Key provisions include the following:
- Concession objects: includes infrastructure facilities like roads, ports, airports, and utilities.
- Tender procedures: mandates open and competitive bidding processes for concession rights.
- Contract terms: outlines essential terms to be included in concession agreements, such as duration, investment obligations, and tariff policies.
- Dispute resolution: provides mechanisms for resolving disputes, including arbitration.
Production-sharing agreements legislation
The Law of Ukraine 'On Production-Sharing Agreements' (PSA Law), enacted on 14 September 1999, establishes the legal framework for the exploration, extraction, and production of mineral resources in Ukraine under production-sharing agreements between the state and investors. The law aims to attract both domestic and foreign investments into Ukraine's mineral resource sector by providing a clear and stable legal regime that defines the rights and obligations of the parties involved.
Key provisions include the following:
- PSAs are contractual arrangements where the state grants an investor the right to explore and extract natural resources. In return, the investor shares a portion of the produced resources or profits with the state. Investors are selected through open tenders or auctions organised by the state.
- Applicable sectors: primarily focused on the oil and gas industries, the law may extend to other natural resource sectors as defined by subsequent regulations.
- Parties to the agreement:
- state representation: the state is represented by the Cabinet of Ministers of Ukraine or authorised bodies.
- investors: can be Ukrainian or foreign legal entities, including joint ventures and consortia.
- Taxation and customs:
- stabilization clause: the PSA may include provisions to protect the investor from adverse changes in tax and customs legislation.
- tax regime: investors may benefit from specific tax conditions stipulated in the agreement, which can include exemptions or reduced rates for certain taxes and duties.
- Profit sharing and compensation:
- cost recovery: investors are entitled to recover their exploration and development costs from a portion of the produced resources before profit sharing.
- profit-Ssaring formula: defines the division of profits between the state and the investor, typically based on predefined percentages or formulas that consider factors like production volume and market prices.
- minimum revenue guarantees: may include clauses ensuring the state receives a minimum level of revenue irrespective of market fluctuations.
- Legal protections and guarantees
- protection against expropriation: investors are safeguarded from unlawful expropriation or nationalisation without adequate compensation.
- repatriation of profits: investors have the right to convert and transfer abroad their profits and other payments related to the investment.
- stability of conditions: the state guarantees that the legal, economic, and financial conditions agreed upon in the PSA will remain stable for the duration of the agreement.
- tax incentives: May provide tax breaks or exemptions to incentivise investment in resource extraction.
- Dispute Resolution: Disputes may be resolved through negotiations, Ukrainian courts, or international arbitration, depending on the terms agreed upon in the PSA.
- Duration: the agreement's term can be up to 50 years, including extensions.
Law 'On Public Procurement'
The Law 'On Public Procurement' law governs the procurement of goods, services, and works by state entities, ensuring transparency and fair competition.
Key provisions include the following:
- procurement procedures: sets out open tender processes and criteria for selecting suppliers or contractors.
- electronic procurement system: mandates the use of the ProZorro electronic system for procurement activities.
- anti-corruption measures: includes provisions to prevent corruption and conflicts of interest in procurement.
Privatisation Legislation
The Law of Ukraine 'On the Privatisation of State and Municipal Property' (Law No. 2269-VIII), enacted on 11 January 2001, provides the legal framework for the privatisation of state and municipal assets in Ukraine. The law applies to the following:
- state-owned property: assets owned by the state of Ukraine, including enterprises, shares, and real estate;
- municipal property: assets owned by local self-government bodies; and
- privatisation objects: includes entire enterprises, blocks of shares, separate real estate units, and other assets designated for privatisation.
Rights and protections for Investors include the following:
- Protection of rights: the state ensures the protection of purchasers' rights under the contract.
- Non-discrimination: equal treatment of domestic and foreign investors is guaranteed.
- Legislative changes: protection against adverse legislative changes affecting the contract terms, particularly concerning property rights.
- Currency transfers: foreign investors have the right to transfer profits abroad, subject to currency control regulations.
Conclusion of privatisation contracts include the following:
- Negotiation: detailed negotiations between the seller (state or municipal entity) and the buyer to finalise terms and conditions.
- Contract terms: inclusion of essential terms such as price, payment schedules, asset transfer conditions and post-sale obligations.
- Regulatory approval: contracts may require approval from relevant governmental bodies or oversight institutions to ensure compliance with legal standards
- Legal registration: official registration of the privatisation contract with appropriate state or municipal registries to formalise ownership transfer.
International legal obligations
Investment treaties
Identify and give brief details of the bilateral or multilateral investment treaties to which the state is a party, also indicating whether they are in force.
Bilateral investment treaties
As of September 2024, Ukraine is a party to the following effective bilateral investment treaties (BITs):
- Ukraine–Qatar BIT (2018) (entered into force on 9 April 2019);
- Japan–Ukraine BIT (2015) (entered into force on 26 November 2015);
- Kuwait–Ukraine BIT (2002) (entered into force on 11 June 2013);
- Israel–Ukraine BIT (2010) (entered into force on 20 November 2012);
- Oman–Ukraine BIT (2002) (entered into force on 12 May 2010);
- Slovakia–Ukraine BIT (2007) (entered into force on 20 August 2009);
- Morocco–Ukraine BIT (2001) (entered into force on 28 April 2009);
- Saudi Arabia–Ukraine BIT (2008) (entered into force on 18 February 2009);
- San Marino–Ukraine BIT (2006) (entered into force on 15 October 2008);
- Singapore–Ukraine BIT (2006) (entered into force on 14 July 2007);
- Panama–Ukraine BIT (2003) (entered into force on 13 June 2007);
- Jordan–Ukraine BIT (2005) (entered into force on 17 April 2007);
- Brunei Darussalam–Ukraine BIT (2004) (entered into force on 26 April 2006);
- Finland–Ukraine BIT (2004) (entered into force on 7 December 2005);
- Albania–Ukraine BIT (2002) (entered into force on 30 April 2004);
- Ukraine–United Arab Emirates BIT (2003) (entered into force on 9 April 2004);
- Bosnia and Herzegovina–Ukraine BIT (2002) (entered into force on 22 January 2004);
- Portugal–Ukraine BIT (2000) (entered into force on 18 July 2003);
- Iran, Islamic Republic of–Ukraine BIT (1996) (entered into force on 5 July 2003);
- Tajikistan–Ukraine BIT (2001) (entered into force on 27 May 2003);
- Libya–Ukraine BIT (2001) (entered into force on 23 April 2003);
- Syrian Arab Republic–Ukraine BIT (2002) (entered into force on 16 March 2003);
- Serbia–Ukraine BIT (2001) (entered into force on 14 August 2001);
- BLEU (Belgium-Luxembourg Economic Union)–Ukraine BIT (1996) (entered into force on 27 July 2001);
- Croatia–Ukraine BIT (1997) (entered into force on 5 June 2001);
- Slovenia–Ukraine BIT (1999) (entered into force on 1 June 2000);
- Lebanon–Ukraine BIT (1996) (entered into force on 26 May 2000);
- North Macedonia–Ukraine BIT (1998) (entered into force on 25 March 2000);
- Spain–Ukraine BIT (1998) (entered into force on 13 March 2000);
- Russian Federation–Ukraine BIT (1998) (entered into force on 27 January 2000). According to the official website of the Verkhovna Rada of Ukraine, the BIT will be terminated on 27 January 2025;
- Turkmenistan–Ukraine BIT (1998) (entered into force on 28 September1999);
- Turkey–Ukraine BIT (1996) (entered into force on 21 May1998);
- Latvia–Ukraine BIT (1997) (entered into force on 30 December 1997);
- Azerbaijan–Ukraine BIT (1997) (entered into force on 9 December1997);
- Austria–Ukraine BIT (1996) (entered into force on 1 December 1997);
- Korea, Republic of–Ukraine BIT (1996) (entered into force on 3 November 1997);
- Chile–Ukraine BIT (1995) (entered into force on 29 August 1997);
- Indonesia–Ukraine BIT (1996) (entered into force on 22 June 1997);
- Belarus–Ukraine BIT (1995) (entered into force on 11 June 1997);
- Netherlands–Ukraine BIT (1994) (entered into force on 1 June 1997);
- Argentina - Ukraine BIT (1995) (entered into force on 6 May 1997);
- Sweden–Ukraine BIT (1995) (entered into force on 1 March 1997);
- Switzerland–Ukraine BIT (1995) (entered into force on 21 January 1997);
- Greece–Ukraine BIT (1994) (entered into force on 4 January 1997);
- Georgia–Ukraine BIT (1995) (entered into force on 18 December 1996);
- Cuba–Ukraine BIT (1995) (entered into force on 4 December 1996);
- Hungary–Ukraine BIT (1994) (entered into force on 3 December 1996);
- Ukraine–United States of America BIT (1994) (entered into force on 16 November 1996);
- Germany–Ukraine BIT (1993) (entered into force on 29 June 1996);
- Moldova, Republic of–Ukraine BIT (1995) (entered into force on 27 May 1996);
- Armenia–Ukraine BIT (1994) (entered into force on 7 March 1996);
- France–Ukraine BIT (1994) (entered into force on 26 January 1996);
- Bulgaria–Ukraine BIT (1994) (entered into force on 10 December 1995);
- Estonia–Ukraine BIT (1995) (entered into force on 4 November 1995);
- Czech Republic–Ukraine BIT (1994) (entered into force on 2 November 1995);
- Kazakhstan–Ukraine BIT (1994) (entered into force on 4 August 1995);
- Canada–Ukraine BIT (1994) (entered into force on 24 July 1995);
- Lithuania–Ukraine BIT (1994) (entered into force on 6 March1995);
- Ukraine–Viet Nam BIT (1994) (entered into force on 8 December 1994);
- Ukraine–Uzbekistan BIT (1993) (entered into force on 26 May 1994);
- Denmark–Ukraine BIT (1992) (entered into force on 29 April 1994);
- Egypt–Ukraine BIT (1992) (entered into force on 13 October 1993);
- Poland–Ukraine BIT (1993) (entered into force on 14 September 1993);
- China–Ukraine BIT (1992) (entered into force on 29 May 1993);
- Ukraine–United Kingdom BIT (1993) (entered into force on 10 February 1993); and
- Mongolia–Ukraine BIT (1992) (entered into force on 5 November 1992);
The following BITs were signed but have not become effective because one or both parties have not completed the relevant procedures:
- Turkey–Ukraine BIT (2017) (upon entering in force, this new BIT will substitute the previous Turkey–Ukraine BIT (1996));
- Equatorial Guinea–Ukraine BIT (2005);
- Gambia–Ukraine BIT (2001);
- Ukraine–Yemen BIT (2001);
- Congo, Democratic Republic of the–Ukraine BIT (2000);
- Romania - Ukraine BIT (1995); and
- Kyrgyzstan–Ukraine BIT (1993).
Also, Ukraine is a contracting party to an investment treaty with the Organization of the Petroleum Exporting Countries Fund for International Development (2017) (entered into force on 27 June 2018).
On 22 September 2023, Ukraine entered into the updated Canada–Ukraine Free Trade Agreement (CUFTA), which entered into force on 1 July 2024. The agreement retains the market access provisions for goods from the Canada–Ukraine Free Trade Agreement (FTA) (2016) and has been updated to include sections on investment, services and inclusive trade. According to Letter No. 72/14-612/1-72491 of the Ministry of Foreign Affairs of Ukraine, dated 28 May 2024, the Canada–Ukraine FTA (2016) and Canada–Ukraine BIT (1994) (except for certain provisions) shall be terminated from the date of entry into force of the updated Canada–Ukraine FTA.
Multilateral investment treaties
Ukraine is a contracting party to the Energy Charter Treaty (ECT).
Ukraine has also signed (but not ratified) the Commonwealth of Independent States (CIS) Treaty on cooperation in investment activity (1993).
If applicable, indicate whether the bilateral or multilateral investment treaties to which the state is a party extend to overseas territories.
The overwhelming majority of BITs to which Ukraine is a party focus on protections for investments made within the sovereign territory of the contracting parties, as outlined in their respective agreements. However, there are several BITs that contain special provisions on the extension of the agreement to overseas territories subject to certain conditions as follows:
- the Netherlands–Ukraine BIT (1994) applies to the European part of the Netherlands, as well as the Netherlands Antilles and Aruba, unless the treaty ratification notification indicates otherwise. However, the relevant ratification notifications do not appear to be publicly accessible;
- the Denmark–Ukraine BIT (1992) states that it may be extended to the territories of the Faroe Islands and Greenland if the contracting parties agree separately. However, there is no publicly available information indicating that such an agreement was reached; and
- the Ukraine–United Kingdom BIT (1993) contains a provision allowing it to be extended to the territories for whose international relations the UK government is responsible, if agreed between the parties through an exchange of notes. Yet, there is no publicly available record of such an extension agreement.
Has the state amended or entered into additional protocols affecting bilateral or multilateral investment treaties to which it is a party?
Additional protocols to BITs and multilateral treaties that have been entered into alongside the main agreements are as follows:
- Protocol to the Energy Charter Treaty on Energy Efficiency and Related Environmental Aspects;
- Protocol to the Ukraine–United Arab Emirates BIT (2003);
- Protocol to the Brunei Darussalam–Ukraine BIT (2004);
- Protocol to the Iran–Ukraine BIT (1996);
- Protocol to the Netherlands–Ukraine BIT (1994);
- Protocol to the Germany–Ukraine BIT (1993);
- Protocol to the Portugal–Ukraine BIT (2000);
- Protocol to the Chile–Ukraine BIT (1995);
- Protocol to the Switzerland–Ukraine BIT (1995); and
- Protocol to the Ukraine–United States of America BIT (1994).
New additional protocols and amendments
Ukraine has concluded the following additional protocols to certain BITs:
- Additional protocol to the Czech Republic–Ukraine BIT (1994) (has been ratified by Ukraine on 20 January 2010); and
- Additional protocol to the Croatia–Ukraine BIT (1997) (has been ratified by Ukraine on 4 October 2017).
Ukraine has also signed and ratified the Amendment to the Trade-related Provisions of the Energy Charter Treaty that entered into force on 21 January 2010.
New investment treaties
Ukraine has concluded the following new BITs and FTAs, replacing the previously effective agreements with these countries:
- the Updated Canada–Ukraine Free Trade Agreement (CUFTA) of 22 September 2023, partially replacing the Canada–Ukraine BIT (1994);
- the Ukraine–Turkey BIT of 9 October 2017, replacing the Turkey–Ukraine BIT (1996) (as of September 2024, this BIT has not yet entered into force, pending the completion of domestic procedures by Turkey);
- the Ukraine–Israel BIT of 24 November 2010, replacing the Israel–Ukraine BIT (1994);
- the Ukraine–Slovakia BIT of 26 February 2007, replacing the Ukraine–Slovakia BIT (1994); and
- the Ukraine–Finland BIT of 7 October 2004, replacing the Ukraine–Finland BIT (1992).
Has the state unilaterally terminated any bilateral or multilateral investment treaty to which it is a party?
Following the outbreak of the full-scale invasion by the Russian Federation of Ukraine on 24 February 2022, Ukraine initiated its exit from a number of bilateral treaties and agreements concluded with the Russian Federation. In particular, on 10 August 2023, Ukraine adopted the Law of Ukraine On Termination of the Agreement between the Cabinet of Ministers of Ukraine and the Government of the Russian Federation on the Promotion and Mutual Protection of Investments (No. 3329-IX). According to the official website of the Verkhovna Rada of Ukraine, the BIT will be terminated on 27 January 2025. As a result of the operation of the BIT’s 'sunset provision', Ukrainian and Russian investments made in the territory of the respective other country prior to 27 January 2025 remain protected under the BIT until 27 January 2035.
Has the state entered into multiple bilateral or multilateral investment treaties with overlapping membership?
Ukraine's membership in the Energy Charter Treaty (ECT) has led to overlapping investment treaty commitments for the country. Ukraine is a party to the multilateral ECT, and it has signed numerous bilateral investment treaties (BITs) with individual countries, some of which are also signatories to the ECT. As a result, the ECT and Ukraine's BITs with ECT member states continue to operate in parallel, giving investors the flexibility to select the agreement they believe provides the most favourable terms when making claims against Ukraine.
Mauritius Convention
Is the state a party to the UN Convention on Transparency in Treaty-based Investor-State Arbitration (Mauritius Convention)?
Ukraine is not a party to the Mauritius Convention.
Investment treaty programme
Does the state have an investment treaty programme?
Ukraine does not have an investment treaty programme.
Government investment promotion programmes
Does the state have a foreign investment promotion programme?
Ukraine actively promotes foreign investment through several key initiatives as follows:
- Law on Investment Nannies (2021): Enacted on 13 February 2021, the Law of Ukraine No. 1116-IX 'On State Support of Investment Projects with Significant Investments', commonly referred to as the 'Investment Nannies Law', aims to attract significant foreign and domestic investments by providing state support to large-scale investment projects. The law introduces a framework for facilitating investments exceeding €20 million by offering various incentives, legal guarantees, and dedicated support services to eligible investors. The Investment Nannies Law represents a strategic initiative by the Ukrainian government to attract and facilitate significant investments by offering a comprehensive package of incentives and dedicated support services. By providing tax benefits, customs exemptions, infrastructure assistance, and personalised support through an assigned manager, the law aims to improve the investment climate and stimulate economic growth in priority sectors.
- UkraineInvest: This state agency serves as the primary manager of Ukraine's investment promotion programme. It offers support for significant investment projects and facilitates access to state support mechanisms.
- Ukraine Facility Programme: This programme is a European Union financial assistance initiative running from 2024 to 2027, allocating €50 billion to Ukraine. It aims to finance the state budget and stimulate investment by mitigating risks for private and institutional investors.
- Regional Investment Promotion: Local government bodies conduct additional investment promotion activities, often through tailored regional investment programmes.
Applicable domestic laws
Identify the domestic laws that apply to foreign investors and foreign investment, including any requirements of admission or registration of investments.
The main domestic laws that apply to foreign investors and foreign investment are as follows:
- Law of Ukraine No. 93/96-ВР, dated 19 March 1996 'On the Regime of Foreign Investments';
- Law of Ukraine No. 1540а-XII dated 10 September1991 'On the protection of foreign investment in Ukraine';
- Law of Ukraine No. 1560-XII dated 18 September 1991 'On Investment Activity';
- Law of Ukraine No. 1116-IX dated 17 December 2020 'On State Support for Investment Projects with Significant Investments in Ukraine';
- The Law of Ukraine 'On Public-Private Partnership' (No. 2404-VI, dated 1 July 2010);
- The Law of Ukraine 'On Concession' (No. 155-IX, dated 3 October 2019);
- The Law of Ukraine 'On Production-Sharing Agreements' (No. 1039-XIV dated 14 September 1999); and
- The Law of Ukraine 'On the Privatisation of State and Municipal Property' (No. 2269-VIII dated 11 January 2001)
In addition to these specialised laws, a number of other legislative acts are applicable, such as the Civil Code of Ukraine, the Commercial Code of Ukraine, the Tax Code of Ukraine, the Land Code of Ukraine and the Custom Code of Ukraine.
These acts together with bilateral investment treaties may provide requirements for admission of investment.
There is no requirement to register an investment. Foreign investors were registering their investments before the enactment of the Law of Ukraine No.1390-VIII, dated 31 May 2016, 'On Amendments to Certain Legislative Acts of Ukraine Concerning the Abolition of Mandatory State Registration of Foreign Investments'.
Relevant regulatory agency
Identify the state agency that regulates and promotes inbound foreign investment.
- UkraineInvest: Established by the Ukrainian government in 2018 and functions as the country's official investment promotion office. In this capacity, it provides comprehensive support to investors, offering reliable and current information, guidance on conducting business in Ukraine, and assistance in identifying optimal investment opportunities. The agency also plays a crucial role in facilitating communication between investors and government entities at various levels, while working to address systemic challenges that investors may encounter. Complementing UkraineInvest's efforts, the Ministry of Economy of Ukraine maintains a significant influence in shaping the nation's investment policy framework.
- The National Investment Council: The Council is an advisory body to the President of Ukraine, which advises on policies to improve the investment climate and coordinates between investors and government agencies.
- State Property Fund: Manages privatisation processes and oversees state property transactions.
- Ministry of Economy: Develops economic policies, including those related to investments and public-private partnerships (PPPs).
Relevant dispute agency
Identify the state agency that must be served with process in a dispute with a foreign investor.
In investment arbitration proceedings, the Ministry of Justice is the designated body to receive service of process on behalf of the state.
Model BIT
Does the state have a model BIT?
The state does not have a model BIT.
Preparatory materials
Does the state have a central repository of treaty preparatory materials? Are such materials publicly available?
The Ministry of Foreign Affairs maintains a State Departmental Archive that houses official documents, including original international treaties and related preparatory materials.
Scope and coverage
What is the typical scope of coverage of investment treaties?
Investment treaties typically define 'investment' and 'investor' broadly, covering various assets and entities, including tangible and intangible property, shares, monetary claims, and intellectual property rights. They apply to investments made by one party's investors in the other's territory, often including those made before and after the treaty's enactment.
The definition of an 'investor' typically encompasses citizens or nationals of a contracting party, generally excluding permanent residents. This, however, is subject to a few exceptions. Four Bilateral Investment Treaties (BITs) (those with Azerbaijan, Canada, Israel, and Kazakhstan) as well as the Energy Charter Treaty, extend protection to both citizens or nationals and permanent residents of the contracting parties. Additionally, BITs with Bosnia and Herzegovina and San Marino offer protection to both citizens and permanent residents of these countries. However, Ukraine only extends protection to citizens, not permanent residents, of these nations.
Several BITs, and a Fair Trade Agreement with Canada, contain provisions that aim to prevent 'treaty shopping' and ensure that only genuine investors from the contracting states benefit from the treaty's protections. Such provisions allow Ukraine to deny benefits to a company either controlled by a national of any third state or which has no substantial business activities in the territory of the other party.
Treaty protections include fair and equitable treatment, full protection and security, national treatment, and most-favoured-nation treatment. They safeguard against expropriation and provide compensation for losses due to extraordinary circumstances.
BITs also offer dispute resolution mechanisms, including investor-state and state-to-state procedures, allowing direct recourse to international arbitration. They typically have set durations with renewal provisions and 'survival clauses' extending protections after termination.
Modern BITs often address performance requirements, subrogation rights, and transparency in investment-related regulations. While generally consistent, specific provisions vary between Ukraine's individual treaties.
Protections
What substantive protections are typically available?
Investment treaties typically offer the following protections to investors:
- Fair and equitable treatment.
- Most-favoured-nation treatment (investors receive treatment no less favourable than that given to investors from any third state).
- Protection against expropriation.
- Compensation for losses (covers losses due to war, armed conflict, national emergency, revolt, insurrection, or riot; specific compensation for property requisitioned or destroyed by host state forces).
- Free transfer of funds (covers profits, capital gains, dividends, royalties, interest, liquidation proceeds, loan repayments, licence and technical fees, and investor earnings).
- Subrogation rights (a contracting party's right to assume investors' rights if it pays under an indemnity, guarantee, or insurance contract).
- Preservation of more favourable treatment (investors can benefit from more favourable treatment provided by domestic legislation or other international obligations).
Only six of Ukraine’s BITs (Armenia, Azerbaijan, Croatia, Russia, Tajikistan and Turkey) do not contain a fair and equitable treatment standard.
By contrast, other BITs are more detailed. The France–Ukraine BIT stipulates that limits imposed on the purchase or transportation for production of raw materials or supporting materials, fuel and energy shall be considered a breach of fair and equitable treatment.
All Ukrainian BITs provide that the provision of most favoured nation or national treatment does not extend to the benefits of membership of a customs union, monetary union or free trade area.
Most carve-outs in BITs relate to taxation and the application of other international treaties.
A total of 27 investment treaties contain an ‘umbreall clause’, including treaties made with the following countries:
- Austria
- Azerbaijan
- Belgium and Luxembourg
- Denmark
- Egypt
- Finland
- Germany
- Italy
- Japan
- Korea
- The Netherlands
- Panama
- Singapore
- Spain
- Switzerland
- The United Kingdom
- The United States
Investor obligations and state rights
What obligations, if any, do investors have under existing BITs, and what is the impact of such obligations on investor protections?
Ukraine's BITs primarily emphasize investor rights and host state obligations, with limited explicit investor obligations. However, these treaties typically require investments to comply with Ukraine's domestic laws at the time of investment. Non-compliance may diminish an investor's ability to claim treaty protections in potential disputes.
Recent developments in Ukraine's international economic agreements have extended limitations on investors' rights to claim and, by extension, implicit duties. An example is the Ukraine–Canada Free Trade Agreement (Canada–Ukraine FTA). Chapter 17 includes standard investment protection provisions, barring investors from submitting claims if their investments were made through fraudulent misrepresentation, concealment, corruption or conduct amounting to an abuse of process. Canada–Ukraine FTA also encourages investors to incorporate internationally recognised standards of responsible business conduct into their practices.
What rights, if any, does the state have to bring counterclaims under existing BITs?
Under the existing BITs, Ukraine does not have a right to bring counterclaims in investment disputes.
Dispute resolution
What are the most commonly used dispute resolution options for investment disputes between foreign investors and your state?
The following are the most commonly used dispute resolution options:
- International Centre for Settlement of Investment Disputes (ICSID).
- ICSID Additional Facility (often mentioned as an alternative when one of the parties is not a member of the ICSID Convention).
- Ad hoc arbitration under the United Nations Commission on International Trade Law (UNCITRAL) Rules.
- The Arbitration Institute of the Chamber of Commerce in Stockholm.
- The International Court of Arbitration of the International Chamber of Commerce.
Confidentiality
Does the state have an established practice of requiring confidentiality in investment arbitration?
Arbitration awards in most investment disputes are public, save for the following cases:
- Remington v Ukraine; and
- JKX Oil & Gas and Poltava v Ukraine.
Hence, Ukraine does not have an established practice of requiring confidentiality in investment arbitration.
Insurance
Does the state have an investment insurance agency or programme?
Ukraine has established a comprehensive investment insurance programme primarily managed by the Export Credit Agency (ECA). This initiative is based on the Law of Ukraine No. 1792-VIII, 'On financial mechanisms to stimulate export activity', adopted on 20 December 2016.
The ECA provides insurance, reinsurance, and guarantees for contracts that promote export development, operating on a voluntary and commercial basis.
As of 1 January 2024, under Law No. 3497-IX, the ECA's mandate has been expanded to include insurance against military and political risks for investments in Ukraine.
The war risks insurable by the ECA encompass the following:
- military conflicts, including war, armed aggression, and hostilities;
- violent changes in constitutional order or seizure of state power;
- terrorist acts and sabotage related to military conflicts; and
- occupation and annexation
The ECA has begun accepting applications for investment insurance and has already signed its first war risk insurance contract for an investment loan.
This programme represents progress in Ukraine's efforts to mitigate risks for foreign investors.
Investment arbitration history
Number of arbitrations
How many known investment treaty arbitrations has the state been involved in?
There are 31 known investment treaty arbitration involving Ukraine as the respondent state.
Industries and sectors
Do the investment arbitrations involving the state usually concern specific industries or investment sectors?
Based on the analysis of known treaty-based investor-state dispute settlement (ISDS) cases, the following industries emerge as prominent in disputes:
- Energy sector (nine cases, 29 per cent):
- Oil and gas (seven cases):
- Ukrnafta v Russia (2015): Expropriation of oil reservoirs in Crimea.
- Stabil v Russia (2015): Expropriation of oil assets in Crimea.
- JKX Oil & Gas and Poltava v Ukraine (2015): Disputes over royalty rates and gas sales regulations.
- Littop and others v Ukraine (2015): Alleged interference with operations of state oil company.
- Naftogaz v Russia (2016): Expropriation of oil and gas assets in Crimea.
- Misen v Ukraine (2021): Dispute over joint activity agreement for gas production.
- VEB v Ukraine (2019): Expropriation of shares in a Ukrainian subsidiary involved in various sectors including energy.
- Renewable energy (one case):
- Modus Energy v Ukraine (2021): Reduction of feed-in tariffs for solar power.
- Nuclear energy (one case):
- Global Trading v Ukraine (2009): Failure to pay for poultry shipped under contracts with a state nuclear energy company.
- Banking and finance (four cases, 13 per cent):
- Privatbank v Russia (2015): Expropriation of banking assets in Crimea.
- City-State v Ukraine (2014): Alleged failure to exercise regulatory oversight over claimant's deposits.
- Oschadbank v Russia (2016): Expropriation of bank branches in Crimea.
- VEB v Ukraine (2019): (Also listed under Energy) Expropriation of shares in a Ukrainian subsidiary.
- Real estate and construction (four cases, 13 per cent):
- Lugzor v Russia (2015): Real estate expropriation in Crimea.
- Everest Estate v Russia (2015): Real estate expropriation in Crimea.
- Bosh v Ukraine (2008): Dispute over a property renovation contract with a university.
- Krederi v Ukraine (2014): Annulment of contracts for property acquisition and development.
- Manufacturing (four cases, 13per cent):
- Wang and others v Ukraine (2020): Freezing of shares acquisition in an aerospace company.
- Emergon and Velbay v Ukraine (2016): Expropriation of shares in an aluminum plant.
- Boyko v Ukraine (2017): Alleged takeover and seizure of a chocolate factory.
- Philip Morris and others v Ukraine (2021): imposition of a fine by an Antimonopoly Committee in the alleged breach of due process.
- Telecommunications and media (three cases, 10 per cent):
- Lemire v Ukraine (I) (1998) and (II) (2006): Disputes over radio broadcasting licences.
- Gilward Investments v Ukraine (2015): Issues related to the bankruptcy of an airline company.
Selecting arbitrator
Does the state have a history of using default mechanisms for appointment of arbitral tribunals or does the state have a history of appointing specific arbitrators?
Ukraine usually dispenses with the default mechanism by appointing arbitrators itself. The only arbitrators who have been appointed more than once are Jürgen Voss and Brigitte Stern.
Defence
Does the state typically defend itself against investment claims? Give details of the state’s internal counsel for investment disputes.
Ukraine actively defends itself against investment claims brought by foreign investors. The process is primarily managed by the Ministry of Justice of Ukraine, which plays a central role in coordinating the state's defence strategy, which typically involves a combination of internal and external resources.
Enforcement of awards against the state
Enforcement agreements
Is the state party to any international agreements regarding enforcement, such as the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards?
Ukraine is a party to the following international agreements that oblige contracting states to recognise and enforce arbitral awards within their territory:
1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (entered into force for Ukraine on 8 January 1961); and
1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (entered into force for Ukraine on 7 April 2000).
Award compliance
Does the state usually comply voluntarily with investment treaty awards rendered against it?
As of 24 September 2024, there have been eight adverse investment treaty awards against Ukraine in the following cases:
- Alpha Projektholding v Ukraine (2010);
- Lemire v Ukraine (II) (2011);
- Remington v Ukraine (2011);
- Inmaris Perestroika v Ukraine (2012);
- Tatneft v Ukraine (2014);
- JKX Oil & Gas and Poltava v Ukraine (2017);
- City-State v Ukraine (2018); and
- Olympic Entertainment v Ukraine (2021).
Based on available data, Ukraine has settled or complied with four out of eight adverse awards against it.
The state voluntarily complied with the arbitral award in Lemire v Ukraine (II) after the ad hoc International Centre for Settlement of Investment Disputes (ICSID) Committee rejected an annulment application by Ukraine.
It did not oppose the investors’ applications for recognition and enforcement before the Ukrainian courts in such cases as Alpha Projektholding and Inmaris Perestroika Sailing Maritime Services.
By contrast, in Remington Worldwide Limited, Ukraine made a payment only after unsuccessful attempts to challenge the enforcement decisions before Ukrainian courts.
With regard to other four arbitral awards (Tatneft v Ukraine, JKX Oil & Gas and Poltava v Ukraine, City-State v Ukraine and Olympic Entertainment v Ukraine), while courts granted enforcement, there is no available information whether Ukraine actually paid the sums ordered.
Unfavourable awards
If not, does the state appeal to its domestic courts or the courts where the arbitration was seated against unfavourable awards?
Ukraine has employed various legal strategies to challenge unfavourable awards:
Set-aside attempts
- Lemire v Ukraine (II): Ukraine attempted to annul the award through the ICSID. During annulment proceedings, it transferred damages to an escrow account as security. After the Ad Hoc Committee upheld the award, funds were transferred to the investor.
- Tatneft v Ukraine: Ukraine unsuccessfully attempted to set aside the award in the Paris Court of Appeal (rejected in November 2016). Consequently, Tatneft obtained favourable recognition decisions in the United State, the United Kingdom, and Russia, initiating enforcement actions.
- JKX Oil & Gas and Poltava v Ukraine: Ukraine's set-aside application was dismissed by the High Court of England and Wales in October 2017. Subsequently, Ukrainian courts partially recognised the award and granted enforcement permission.
Challenges to enforcement
According to the Unified State Register of Court Decisions, Ukraine challenged enforcement decisions in Ukrainian courts for:
- Remington Worldwide Limited;
- City-State v Ukraine; and
- Olympic Entertainment v Ukraine.
However, none of these challenges was successful.
Provisions hindering enforcement
Give details of any domestic legal provisions that may hinder the enforcement of awards against the state within its territory.
Ukraine is a signatory to the New York Convention, incorporating its provisions, particularly Article 5, into domestic enforcement procedures. The Civil Procedure Code of Ukraine mirrors these grounds for refusing recognition and enforcement of arbitral awards.
As exemplified in the JKX Oil & Gas and Poltava v Ukraine case, the state may resist enforcement based on article 478 of the Civil Procedure Code, citing the following:
- violation of due process
- lack of jurisdiction
- violation of public policy.
Courts may consider these arguments but still enforce awards partially, as seen in the JKX Oil & Gas case.
Additionally, the Law of Ukraine 'On International Private Law' imposes state immunity restrictions. However, as demonstrated in Everest Estate LLC v Russian Federation, agreeing to arbitration in a bilateral investment treaty may be construed as a waiver of immunity.
Key developments of the past year
Are there any emerging trends or hot topics in your jurisdiction?
Russia’s 2014 annexation of Crimea and 2022 invasion of Ukraine continued to impact the legal landscape in 2024. Several hot topics and emerging trends are worthy of attention as follows:
- Disputes Related to Annexed and Occupied Territories: In disputes concerning the annexed or occupied territories, arbitral tribunals have developed a two-pronged approach, considering both legal steps (eg, annexation laws) and physical control to determine if these areas fall under Russia's 'territory' for BIT purposes. Tribunals have frequently found Russia liable for actions committed on the annexed territories, particularly regarding unlawful expropriation (eg, Ukrnafta v Russia; Everest and others v Russia). This trend is likely to continue as the conflict persists and potentially expands to other regions. Several Ukrainian individuals and companies have already threatened to bring investment claims. This includes Ukrhydroenergo, Ukraine’s state-owned hydro-energy company, that contemplates seeking damages caused by Russia’s destruction of the Kakhovka hydro-power plant. This also includes Ukraine’s National Nuclear Energy Generating Company (Energoatom) that has put Russia on notice in a dispute concerning an expropriation of the Zaporizhzhia nuclear power plant.
- Russia's approach to arbitrations: Initially absent from arbitrations concerning Crimea investments, Russia has shown a trend towards selective participation in more recent proceedings. In one investment arbitration (SCM Group v Russia) and other international disputes, Russia challenged virtually all arbitrators on the grounds of perceived bias, demanding that they be replaced by citizens of non-NATO-friendly countries. This tactic is likely to be employed in future disputes, as it has already yielded results (in SCM Group v Russia, two out of three arbitrators have been replaced).
- Challenges in award enforcement: Even when investors secure favourable awards against Russia, enforcement remains a significant challenge. State immunity issues complicate enforcement in third countries.
- Impact on third-country investors: The Russo–Ukrainian war is affecting not only Ukrainian investors but also those from third countries with assets in Ukraine. The threat of initiating investment arbitration against Ukraine made by AMIC Energy (Austria), a fuel retailer, demonstrates how measures targeting Russian-linked assets can impact investors from other nations.