FDI in the waiting room: Ukraine’s screening proposal could rewrite the local playbook

At the end of September, a draft law introducing a foreign direct investment (FDI) screening regime in Ukraine (the “Draft Law”) was registered in the Parliament of Ukraine¹. The Draft Law aims not only to introduce an FDI screening regime into the Ukrainian investment framework, but also from the outset to align national legislation in this area with EU and US standards, as well as to reflect global trends in investment control. Although the wording of the Draft Law may change during the legislative process, once adopted, it will likely have a significant impact on cross-border transactions. This alert addresses key questions foreign investors may have regarding the proposed screening regime.

Who may be affected by the changes?

Foreign investors aiming to invest in Ukrainian:

• military and dual-use products (including among others, drones);
• strategic metals and minerals (for instance, aluminium, iron, titanium); and
• critical infrastructure (a broad category including energy and water supply infrastructure, healthcare facilities, etc.)².

The Draft Law defines companies engaged in the above activities and which are the targets of investments and acquisitions by foreign investors, as “screening entities”. The current wording of the Draft Law could be interpreted to mean that any foreign direct investment into a company qualifying as a screening entity – regardless of the size of the shareholding, the assets to be acquired or whether control over the screening entity would in fact be obtained – will be subject to the FDI screening process. This would imply that, for instance, even the acquisition of a minor shareholding in a screening entity, below the thresholds discussed below, would require approval under the FDI screening regime. We doubt that this is the lawmakers’ intended outcome and therefore expect the wording to be amended during the parliamentary consideration of the Draft Law.

Will indirect acquisitions also be covered?

Yes, under the current wording of the Draft Law screening will apply to both direct and indirect acquisitions by foreign investors in screening entities involving:

• more than 25% of voting rights;
• ownership or use rights over assets representing 10% or more of target’s book value; or
• rights to appoint the sole executive body or more than 50% of a collegial executive body, elect more than 25% of the supervisory body or block decisions of the target’s governing bodies.

In addition, as noted above, unless amended during the legislative process, the screening will also apply to other transactions involving FDI into screening entities.

Will the Ukrainian FDI regime be extraterritorial?

The Draft Law, in its current form, does not expressly state that transactions taking place abroad – but concerning Ukrainian companies and operations (such as the acquisition of shares in foreign-registered holding companies operating via Ukrainian-registered screening enterprises) – fall within the scope of the FDI screening regime. Furthermore, the definition of screening entities appears to apply only to companies registered in Ukraine.

However, given that indirect acquisitions and investments into screening entities are covered under the Draft Law, foreign structured indirect acquisitions and investments into such entities are likely to fall within the scope of the Ukrainian FDI screening regime.

How long will the screening take?

The Draft Law provides that the screening authority will have:

• 60 days to review the completeness of the submitted data; and
• 90 days to complete the screening procedure (excluding the initial 60-day r review period).

The timeframes do not include any additional time required for information requests and responses between the foreign investor and relevant authorities.

What s are the possible outcomes of the FDI screening?

According to the Draft Law, a special intra-governmental commission will be established under the auspices of the Ministry of Economy of Ukraine to review and prepare decisions on the outcome of the FDI screening. The following may be the types of the decisions issued under the FDI screening process:

• an unconditional approval;
• a conditional approval; or
• a prohibition of the investment.

The current wording of the Draft Law envisages that a transaction subject to FDI screening may be prohibited if the investor has a history of Russian ties (e.g. Russian citizenship or a share in authorised capital) or if sanctions have been applied to the investors. Overall, the grounds for prohibiting investments are relatively limited and appear to be linked to the current war-related circumstances. It cannot be excluded that, during the parliamentary consideration of the Draft Law, these grounds will be extended to reflect the experience of other countries in this strategic area.

How will this affect the merger control procedure?

Under the Draft Law, the Ukrainian competition authority will not be able issue merger clearance for transactions until the Ministry of Economy either approves the FDI or confirms that screening is not required. This should be factored into transaction timelines where merger clearance is necessary.

What are the consequences of non-compliance?

Violations of the FDI screening requirements may result in various sanctions, depending on the nature of the breach. These may include:

• prohibition or invalidation of the transaction;
• suspension of voting rights acquired through the transaction;
• loss of the right to receive dividends;
• a fine of up to 50% of the FDI amount; and
• compensation for damage to national security or interests, as determined by a court.

Will there be post-approval monitoring FDI?

Yes. Following approval, foreign investors will be required to submit data to the Ministry of Economy for monitoring purposes and to notify it of any changes in the control structure.

What’s next?

We will continue to monitor the progress of the Draft Law, including its review by the relevant parliamentary committee and the Parliament of Ukraine. In particular, we will track developments that may clarify the ambiguity surrounding acquisitions structured through foreign jurisdictions, as well as any foreign direct investments – regardless of the size of the shareholding or assets to be acquired in screening entities or whether control will be obtained over them – particularly in terms of whether they will indeed be subject to the FDI screening regime.

If adopted, the law will enter into force six months after its official publication. It will not apply retroactively to investments made prior to its introduction. However, foreign investors planning future investments in Ukraine should consider the anticipated changes and adjust transaction timelines accordingly to ensure compliance with the new monitoring requirements.

1. The Draft Law No. 14062 “On Foreign Direct Investment Screening” dated 22 September 2025. ↩︎
2. Ukrainian critical infrastructure objects are listed in the Register of Сritical Infrastructure Objects. Access to the register is limited, as it contains confidential information. Under the Draft Law, foreign investors will be able to clarify with the Ministry of Economy whether the proposed target is considered a critical infrastructure object. ↩︎