Foreign Direct Investment Screening

In late September 2025, the Verkhovna Rada of Ukraine was submitted with Draft Law No. 14062 “On Screening Foreign Direct Investments” (the “Draft Law”) containing propositions on implementing mechanisms for monitoring foreign direct investments (“FDIs”) in critical sectors of the economy. Currently, the Draft Law will only be considered in the first reading, so its provisions may change in the final version.

The purpose of implementing screening procedures is to assess FDIs’ impact on national security. Similar screening mechanisms are applied in a number of European countries.

FDIs will be subject to screening if they involve Ukrainian entities operating in the following areas:

1. Critical infrastructure or those managing critical infrastructure facilities (power plants, ports, pipelines, water supply/wastewater entities, pharmaceutical enterprises, defense entities, financial institutions, etc.);
2. Use of metal ores and non-metal minerals that are of strategic significance for the economy and defense capability of the country (the list of such ores shall be determined by the Cabinet of Ministers of Ukraine);
3. Designing, manufacturing, modernizing, repairing, transporting, disposing, and trading in military goods and dual-use items.

Screening procedures are going to be applied in respect of a specific type of agreements, in particular, when an investor:

1. Acquires the right to dispose of shares in share capital that give voting rights in the amount of more than 25% of their total number;
2. Acquires the right to appoint a director, more than 50% of the collegial executive body, more than 25% of members in the supervisory board, or block decisions of the entity’s management bodies;
3. Purchases or leases the entity’s property, plant, and equipment the cost of which exceeds or is equal to 10% of the total value of assets specified in the recent financial statements.

Screening procedures

The Ministry of Economy will be the body responsible for screening and applying impact measures.

A Commission on Impact Assessment of FDI (the “Commission”) will be established at the Ministry of Economy which is going to define grounds for conducting FDI screening, prepare decisions on refusing from implementing FDIs and conclusions on the risks related to FDIs.

The Commission will include representatives of the Foreign Intelligence Service, the Security Service of Ukraine, the Ministry of Foreign Affairs, and the sectoral body in the area of critical infrastructure protection (if needed).

Before making FDIs, an investor should submit an approved package of documents and obtain an approval (with or without conditions) from the Ministry of Economy, which, within 90 days, shall take a decision on approving or refusing from implementing FDIs.

Sanctions

Conducting FDIs without obtaining a prior approval may entail the following risks:

1. Invalidation of deeds concluded by an investor as null and void;
2. Depriving the investor of the right to vote;
3. Enforcing a ban on paying dividends to the investor;
4. Imposing a penalty of 50% of FDI amount.

Concentration

It is planned to introduce changes to the relevant legislation related to granting concentration permits, in particular, the Antimonopoly Committee of Ukraine shall not grant such a permit without a decision of the Ministry of Economy on the absence of grounds for FDI screening or FDI approval.

Conclusions

The general idea of screening FDIs is logical and reasonable. In addition, the proposed mechanism is consistent with the course towards European integration. At the same time, a key issue remains its practical implementation. Ukraine requires significant FDIs in varied sectors of the economy. Therefore, it is important to understand the main direction of movement and find a balance between increasing the volume of investments and creating additional protective mechanisms.

FDI screening mechanisms are necessary, but they should harmonize with the existing legislation requirements related to FDIs. For instance, the antimonopoly legislation, government incentives for large investment projects (“investment nannies”), the Anti Money Laundering legislation, licensing requirements to conducting activities in certain areas, international treaties concluded by Ukraine, etc.

The state should ensure that a transparent and effective mechanism for supervising FDIs be developed that is not going to create artificial obstacles to much-needed investments.

_{The above review is provided by Deloitte experts for information purposes only and should not be used as official advice without an in-depth expert analysis.}

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