Franchising under Ukraine’s Draft Civil Code: Eight Proposals and What They Mean for Foreign Franchisors

Ukraine is rewriting its civil law. On 28 April 2026 the Verkhovna Rada adopted at first reading draft law No. 15150, a new Civil Code in nine books that will replace the current Code of 2003, including a separate book on private international law. For franchising in Ukraine the draft finally uses the word: the “commercial concession” of Chapter 76 of the current Code (Articles 1115–1129) becomes a “franchise agreement” in Chapter 84 of the draft (Articles 1356–1366).

The new name is most of what changes. The chapter largely repeats the current text, it still has no pre-contractual disclosure, and it drops two rules that exist today: the provision on exclusivity and non-compete clauses, and the franchisor’s liability towards the franchisee’s customers. In summer 2026 we submitted eight proposals on Chapter 84 to the working group preparing the second reading. This note sets them out for lawyers advising franchisors that operate in Ukraine or plan to enter the market.

• Governing law. Absent a choice of law, the draft subjects a franchise agreement to the law of the franchisor’s country. The EU’s Rome I Regulation points the other way, to the law of the franchisee’s country. We propose aligning the draft with Rome I. Either way, choose the governing law expressly.
• No disclosure duty yet. Neither the current Code nor the draft requires pre-contractual disclosure. We propose a 14-day disclosure rule modelled on the UNIDROIT Model Law.
• Post-term non-compete. The draft contains no rule at all. We propose limits taken from Article 5(3) of the EU Vertical Block Exemption Regulation: one year, the franchisee’s former territory, competing goods or services only.
• Buy-back of equipment. The draft obliges the franchisor to buy back the franchisee’s equipment on termination or non-renewal, unless the contract provides otherwise. Expect this to be negotiated.
• Liability to consumers. The current Code makes the franchisor liable with the franchisee for the quality of goods and services; the draft drops this. We propose restoring it in a narrower form.
• Notice periods. The draft keeps a flat six-month notice for open-ended agreements and no notice for non-renewal. We propose 180 days’ notice of non-renewal and a notice period that grows with the length of the relationship.

None of this is law yet: Chapter 76 of the current Code governs until the new Code enters into force.

Article 1356 of the draft, like Article 1115 of the current Code, defines the contract as the grant of a “complex of rights” belonging to the franchisor. No Ukrainian statute defines that term; it is a descriptive construct of post-Soviet doctrine. Article 1357 then lists “commercial experience” and “business reputation” as the subject matter of the contract, although neither can be transferred as an object of rights.

We propose a functional definition familiar from international practice: the franchisor grants the right to use its trade mark, commercial designation and know-how, including methods and standards of doing business, and provides continuing support. This tracks the definition of a franchise in Article 2 of the UNIDROIT Model Franchise Disclosure Law (2002): a business operated under the franchisor’s system, which includes know-how and assistance, associated with its trade mark and subject to its continuing control. For a court, a functional definition is what separates a franchise from a licence, a distribution agreement or an agency, and the classification decides which rules, including competition rules, apply.

Chapter 84 imposes no disclosure duty. Most developed franchise markets do: the FTC Franchise Rule in the United States (since 1979, amended 2007), the Australian Franchising Code (since 1998), the Loi Doubin in France (since 1989) and Article 62 of the Spanish Retail Trade Act. France and Spain require disclosure at least twenty days before signature; the UNIDROIT Model Law at least fourteen days before signature or any non-refundable payment.

We propose a new Article 1357-1: a disclosure document delivered at least 14 calendar days before signature and before any payment, with seven mandatory blocks — the franchisor’s identity; franchise-related litigation in the previous three years; a description of the system and its market experience; all fees (initial fee, royalties, marketing and other contributions); exclusive and restrictive terms; renewal, amendment and termination; and the list of current franchisees with contact details. Non-disclosure would allow the franchisee to have the contract set aside and claim damages; shortening the period by agreement would be void.

Not sure how a Ukrainian court would read your franchise agreement against these rules? Send us the clause that worries you — within one business day we will say whether it holds under the current Code and the draft.

Both the current Code and the draft speak only of “payment”. We propose listing the usual forms — initial fee, royalties (turnover-based or fixed), contributions to a marketing fund, fees for training and support — and adding that an obligation to buy only from suppliers designated by the franchisor, without a legitimate business reason or at prices significantly above market, may be held by a court to restrict competition.

The benchmark is EU law. In Pronuptia (1986) the Court of Justice accepted that requiring the franchisee to sell only goods supplied by the franchisor or its designated suppliers may be necessary to protect the network’s reputation, provided the franchisee remains free to obtain the goods from other franchisees (paragraph 21). The Commission’s Vertical Guidelines) (paragraph 166) treat as falling outside Article 101(1) TFEU only provisions strictly necessary for the functioning of the franchise system, including obligations relating to the goods purchased by the franchisee that maintain the network’s common identity and reputation.

The one genuine novelty of Chapter 84 is Article 1360(2)(3): on termination or non-renewal the franchisor must buy back the inventory, equipment and furniture the franchisee acquired for the franchise, “at the price paid less depreciation”. The rule applies only “unless the franchise agreement provides otherwise”, so a standard form can exclude it in one line.

We propose three corrections: use the accounting concept of residual (net book) value under Ukrainian Accounting Standard 7; limit the duty to termination or non-renewal at the franchisor’s initiative and to assets bought at the franchisor’s request or with its consent solely for the franchise; and make a clause that excludes buy-back altogether void where the franchisor ends the relationship. Foreign franchisors should expect the buy-back to become a negotiated term, and price it in.

The draft drops Article 1122 of the current Code on exclusivity and non-compete clauses, and with it the rule that a clause allowing the franchisor to fix resale prices is void. The current Article 1122 does not distinguish in-term from post-term non-compete and sets no limits on the latter; an excessive post-term restriction may already infringe Article 6 of the Law on Protection of Economic Competition (anticompetitive concerted practices).

We propose a new Article 1361-1. In-term exclusivity and non-compete are permitted. A post-term non-compete is valid only if it lasts no more than one year, covers only the territory where the franchisee operated, and relates only to competing goods or services; anything beyond is void to that extent. The model is Article 5(3) of Regulation (EU) 2022/720, which exempts a post-term non-compete only if it concerns competing goods or services, is limited to the premises and land from which the buyer operated, is indispensable to protect transferred know-how, and lasts no more than one year. Our wording is somewhat wider on territory but keeps the one-year cap and the “competing goods” test, which replaces the undefined “analogous rights” of the current Code.

Article 1123 of the current Code makes the franchisor subsidiarily liable for claims about the quality of the franchisee’s goods and services, and jointly liable where the franchisee manufactures the franchisor’s products. Chapter 84 has no such rule.

We propose differentiated liability. For services: subsidiary liability, and only where the franchisor controlled quality under the contract — which, under Article 1360(2)(2) of the draft, it must do unless the contract provides otherwise. For goods: joint liability, because the consumer buys the franchisor’s brand. This follows product-liability law: Directive (EU) 2024/2853, which replaces Directive 85/374/EEC from 9 December 2026, treats as a manufacturer anyone who presents itself as such by putting its name or trade mark on the product (Article 4(10)(b)); so do § 4 ProdHaftG in Germany and section 2(2)(b) of the Consumer Protection Act 1987 in the UK. Between the parties, the franchisor keeps a right of recourse against a franchisee who breached the quality standards.

Article 1362 of the draft keeps the franchisee’s right to renewal, three grounds on which the franchisor may refuse, and damages for wrongful refusal, but no notice period. We propose that a franchisor who does not intend to renew must say so at least 180 days before expiry — as section 36 of the Australian Franchising Code requires six months’ written notice; in France, ending an established commercial relationship without sufficient notice is a rupture brutale under Article L.442-1 II of the Code de commerce. We also propose compensation for unrecovered capital investment made at the franchisor’s request or with its consent where the term proved shorter than the payback period. We do not propose a minimum term: it would penalise short formats and pilot projects.

Article 1363(1) of the draft keeps a flat six-month notice for terminating an open-ended agreement. We propose one month for each full year of the relationship, with a floor of six and a ceiling of eighteen months unless the contract provides more, together with a duty on both sides to mitigate losses during the notice period. The approach draws on Belgian law, where termination of an open-ended exclusive distribution agreement requires reasonable notice or fair compensation and the court fixes the period failing agreement (Article X.36 of the Code of Economic Law, formerly the 1961 Act); on Dutch case law, under which reasonableness and fairness may require a notice period, taking into account unrecovered investment and dependence (Hoge Raad, 28 October 2011, ECLI:NL:HR:2011:BQ9854); and on French case law, where economic dependence lengthens the required notice (Cass. com., 18 November 2020, No. 18-25.709).

Ukrainian conflict rules today follow the characteristic-performance approach: absent a choice, a franchise (“commercial concession”) agreement is governed by the law of the franchisor’s country (Article 44 of the Law on Private International Law). The draft keeps this in Article 1847(2)(20) and still calls the contract a “commercial concession”. Rome I (Article 4(1)(e)) applies the law of the franchisee’s habitual residence. In our proposals to Book 8 of the draft (private international law) we suggest adopting the Rome I rule, together with habitual residence as the connecting factor and a rule for distribution agreements. The practical conclusion holds whichever rule is adopted: choose the governing law expressly — see our separate note on which law will govern a contract with a Ukrainian company under the new Code and do not leave it to the default rule.

The first reading changes nothing in force, but it shows where the law is heading. Review existing agreements for four points: a post-term non-compete longer than one year or without territorial limits, which is already exposed under competition law; buy-back terms, since silence will not favour the franchisor once the new Code applies; the fee structure, where mandatory purchasing that works as a disguised royalty carries tax and competition risk; and a disclosure document, which strengthens the franchisor’s position in negotiations and, if it comes to that, in court. For franchisors planning market entry into Ukraine, the direction of travel is reassuring: the proposed rules are those of the markets they already know.

Draft law No. 15150 was registered on 9 April 2026, replacing draft No. 14394, and adopted at first reading on 28 April 2026 by 254 votes; its status is “being prepared for second reading”. On 8 October 2026 the Verkhovna Rada held a round table on the new Civil Code as part of its “Parliamentary Dialogue”. Our proposals on Chapter 84 are one part of our work on the draft; we have also written on judicial reduction of contractual penalties under the current Code and the draft (see our guide to Article 551). For background on the current regime, see our guide to franchise agreements in Ukraine and Anna Tsirat’s franchising books and country reports.

This note discusses a draft law that has passed first reading only; until the new Code enters into force, Chapter 76 of the current Civil Code applies. It is not advice on any particular agreement. JVS Law advises franchisors and franchisees on franchising in Ukraine, contract drafting and review and commercial disputes.