Legal Framework and Restrictions on Distribution in Ukraine

Distribution in Ukraine is built upon a combination of civil-law provisions, antitrust regulations, and specialized sectoral rules. The civil code defines the fundamental mechanisms (sale, commission, agency), while every agreement must comply with competition law requirements and, where applicable, industry-specific laws governing particular categories of goods.

In short: a distribution agreement in Ukraine is structured as a sale, a commission or an agency, and that choice decides who owns the goods and bears the risk of unsold stock. Vertical restraints need no AMCU permission while the supplier’s and the buyer’s market shares do not exceed 30 %, but a fixed or minimum resale price or a ban on passive sales takes the agreement out of that exemption. Tobacco, alcohol, e-cigarette liquids and fuel are subject to a separate licensing and record-keeping law.

Distribution in Ukraine is governed by general civil-law rules that provide flexible tools for structuring relationships between a manufacturer (supplier) and a distributor. The most common—and foundational—method for formalizing these relationships is a contract of sale. Under Article 633 of the Civil Code of Ukraine (CCU), the seller transfers the goods into the buyer’s ownership, and the buyer undertakes to pay the agreed price. Articles 634–642 of the CCU detail the parties’ respective obligations: the delivery procedure, payment deadlines, liability for defects, and measures to address identified deficiencies. For the distributor, they become the direct owner of the goods and assume the full risk of storage and subsequent resale.

In wholesale-retail distribution, a contract of sale acquires several distinctive features. First, it often specifies minimum purchase quantities that the distributor must buy over a period (e.g., a month or a quarter). This helps the manufacturer plan production capacity and output volumes, but requires clearly defined penalties should the distributor fail to meet these obligations. Second, pricing in a standard sale contract is typically a fixed price per unit; however, distributors often receive volume-based discounts or rebates. If price adjustments become necessary—for example, due to inflation or changes in raw material costs—it is advisable to include an escalation mechanism or indexation clause in the contract tying price changes to a reference index, such as a currency exchange rate or a producer price index. Third, the agreement may grant territorial exclusivity, whereby the distributor obtains the exclusive right to sell the product within a specified territory. Such a clause usually appears as a separate section that lists the designated regions and restricts the manufacturer from supplying the same goods to other partners in those regions. At the same time, one must ensure that granting exclusivity does not contravene competition law, particularly by leading to an excessively high market share.

Moreover, a multi-faceted distribution agreement often includes sale provisions and clauses relating to supply, storage, and the use of intellectual property assets. For example, the manufacturer may grant the distributor a license to use trademarks, logos, know-how, or proprietary technologies in marketing materials and packaging. In that case, the agreement will include a license sub-agreement specifying the terms for granting IP rights (duration, territorial scope, permitted modes of use) and the requirements for the storage and protection of confidential technical data, creative works, or patented inventions. Frequently, the contract also includes instructions on proper storage of both the physical goods (storage conditions, temperature controls, restricted access), along with a quality-control and audit regimen imposed by the manufacturer.

Not every distributor is willing or able to purchase the goods outright. In such instances, Ukrainian law provides two alternative frameworks: commission agreements and agency agreements. Under a commission agreement (Articles 1000–1009 CCU), the principal (manufacturer) delivers goods to the commission agent (distributor-commissionaire) for sale in the agent’s name but at the principal’s expense. The commission agent acts on their behalf and receives a commission, either a fixed fee or a percentage of the sale price. This model is suitable when the manufacturer seeks to minimize the risk associated with unsold inventory. If the commission agent fails to sell the goods, they return them to the principal. However, the commission agent does not acquire ownership of the goods and is compensated only upon a successful sale, which may reduce their incentive to actively promote the products.

The alternative is an agency agreement (Articles 1010–1016 CCU), under which the agent (distributor-agent) negotiates and concludes contracts on behalf of the principal (manufacturer). In this arrangement, the manufacturer formally signs all sales contracts, while the agent facilitates their execution and earns a commission. This approach lets the manufacturer retain strict control over pricing and sales terms. The agent never acquires title to the goods and does not bear the risk of storage or resale; accordingly, the agent’s commission is typically lower than that of a commissionaire, since the principal absorbs the primary commercial risk.

Therefore, the choice among a contract of sale, a commission agreement, and an agency agreement depends on whether the distributor intends to become the owner of the goods or merely to sell them on behalf of the manufacturer, as well as on which party is prepared to assume the risk of unsold inventory and how the manufacturer intends to control pricing and brand image. If the distributor is ready to invest in purchasing, warehousing, and marketing the goods, a contract of sale is the most advantageous. Conversely, a commission or agency agreement is appropriate if the manufacturer aims to minimize risk while simultaneously expanding their distribution footprint via a network of intermediaries.

Finally, calling the arrangement a “distribution agreement” is entirely appropriate. Such a title immediately clarifies the business model—the supplier, the distributor, and the flow of the product. At the same time, it is essential to remember that a specific type of civil-law contract is under that title. Accordingly, the text of any “distribution agreement” must explicitly state whether it is a contract of sale, a commission agreement, or an agency agreement, and must plainly set out the respective rights and obligations of the parties. The agreement violates civil-law principles if the title denotes roles but the substance does not conform to any recognized contract form. Thus, correctly combining the terminology (“distribution agreement”) with precise legal structuring (sale, commission, or agency) ensures transparency of relations and helps avoid misunderstandings during performance.

Freedom of contract stops where the Law of Ukraine “On Protection of Economic Competition” begins. A distribution agreement almost always contains vertical restraints: resale price, territory, exclusivity, non-compete. Under Articles 5 and 6 of the Law these are concerted actions, and the only question is whether the agreement falls within the exemption.

The exemption comes from the AMCU Typical Requirements for vertical concerted actions (AMCU Order No. 10-rp of 12 October 2017). No AMCU permission is needed where the supplier’s share of the market on which it sells and the buyer’s share of the market on which it purchases each do not exceed 30 %. The law does not require a separate mandatory notification of a distribution agreement: merger notification concerns acquisitions and mergers. Where the agreement falls outside the exemption, the restraints are assessed individually, and anticompetitive terms need AMCU permission before they are implemented (Article 10 of the Law).

Whatever the market shares, the exemption does not apply if the agreement contains hardcore restrictions. They include a fixed or minimum resale price and a ban on passive sales by a distributor granted an exclusive territory. The full list of restrictions, the rules on non-compete clauses, the test for the agency model and a checklist are covered in “Distribution Agreements in Ukraine: The Clauses That Void the AMCU Exemption”.

Anticompetitive concerted actions carry a fine of up to 10 % of the previous year’s revenue (Article 52 of the Law). Price, territory and non-compete clauses are therefore worth checking before signing, not after the AMCU’s first request.

In the sphere of distribution for certain goods—namely, tobacco products, e-cigarette liquids, alcoholic beverages and fuel—Ukrainian law has adopted a new, more integrated approach. The current cornerstone is the Law of Ukraine “On State Regulation of Production and Circulation of Ethyl Alcohol, Distillates, Bioethanol, Alcoholic Beverages, Tobacco Products, Tobacco Raw Materials, Liquids Used in Electronic Cigarettes, and Petroleum Products.” This law consolidates previously fragmented regulations controlling each category of goods separately and establishes a unified licensing, record-keeping, and oversight system. It aligns licensing, tracking, and control procedures to avoid duplicating requirements and to ensure a transparent chain of accountability from the manufacturer to the end consumer.

In sum, the industry-specific regulations for these categories of goods create a tightly regulated environment that requires businesses to navigate a unified licensing, excise, and monitoring framework. This ensures that consumer health is protected from the moment of manufacture to the point of sale, and market integrity is maintained.

We have worked with exactly these categories: distribution in Ukraine of nicotine and caffeine pouches for oral use (caffeine pouches being new to the Ukrainian market) and of e-cigarettes. In agreements of this kind, the work depends on how precisely the processes must be described. A full agreement typically takes 20 to 30 hours; where the client brings its own draft, we review it and add the provisions that give it firmer ground.

We have reviewed the core civil-law mechanisms for entering into distribution agreements, the restrictions imposed by competition law, and the specific regulatory requirements for tobacco products, electronic cigarettes, and alcoholic beverages. These elements provide the foundation for establishing reliable and legally compliant relationships between manufacturers and distributors.