Ukraine’s FDI Screening: What the New EU Regulation Changes — and What It Doesn’t

Contents

• 1. What the New EU Regulation Actually Changes
• 2. Ukraine’s Two Bills: What Falls Under Screening
• 3. Three Current Entry Points — and Why They May Not Last
• 4. Structuring for the Transition
• 5. FAQ

~ 12 min read

A Practical Guide for Foreign Investors Navigating Ukraine’s Emerging FDI Screening Regime

On 19 May 2026, the European Parliament adopted a new EU Foreign Investment Screening Regulation — the most significant overhaul of the EU’s approach to FDI screening since 2019. For most investors focused on EU markets, this means updating compliance workflows and preparing for mandatory screening in sectors that were previously discretionary. For investors looking at Ukraine, the picture is more nuanced — and more consequential.

Ukraine is an EU candidate country with two competing FDI screening bills pending in the Verkhovna Rada. Neither bill was drafted against the final text of the new Regulation. Any law Ukraine adopts now will eventually be tested against the new EU benchmark during the accession process. Getting this right matters — not just for Ukraine’s security posture, but for the regulatory credibility that foreign investors require.

The core change is straightforward: what was previously voluntary is now mandatory. Under the old 2019 framework, EU Member States were encouraged — but not required — to maintain FDI screening mechanisms. The new Regulation eliminates that optionality. All Member States must now operate a mandatory pre-closing screening regime covering a defined minimum set of sectors: defense-relevant technologies including AI, quantum, and semiconductors; energy, transport, and digital infrastructure; critical raw materials; and dual-use goods.

Three other changes have direct implications for deal structuring. First, the Regulation closes the so-called Xella loophole: investments made through EU-established subsidiaries controlled by non-EU investors are now captured, eliminating a common routing structure that previously escaped screening. Second, authorities can now review completed but non-notified transactions in mandatory sectors for up to five years post-closing — a significant extension of call-in powers that changes how you think about historical transactions, not just future ones. Third, the European Commission’s coordination role is strengthened, meaning that a transaction cleared by one Member State may still attract the Commission’s attention or peer comments from others.

But the new Regulation is also — deliberately — a floor, not a ceiling. It enshrines what lawyers call the minimum harmonization principle: Member States can go further, provided they do not undermine the Regulation’s objectives. Two areas where this matters for Ukraine are greenfield investments and transactions involving intangible assets. The Regulation introduces definitions for both but does not mandate their screening — leaving that choice to national legislatures. As we explain below, neither of Ukraine’s current bills exercises that choice. Whether the final Ukrainian law does so will be one of the most consequential design decisions of the current legislative cycle.

A detailed comparative analysis of both bills against EU and US models is available in our earlier publications. This section focuses on one practical question: what sectors and transaction types will actually be subject to screening under each bill.

Bill No. 14062 covers three categories: operators of critical infrastructure listed in the state registry; companies engaged in the extraction of metallic ores and non-metallic minerals designated as strategically important for economic development and defense capability (the specific list to be approved by the Cabinet of Ministers); and companies engaged in the development, production, modernisation, repair, transportation, disposal, and trade in military goods and dual-use items. Screening is triggered when a foreign investor acquires more than 25% of the voting rights, appointment rights to executive bodies, or assets representing 10% or more of the target’s balance sheet value.

Bill No. 14062-1 defines screening objects more broadly as legal entities and assets active in sectors designated by the Cabinet of Ministers — a list yet to be approved — and triggers screening on acquisition of control, acquisition of fixed assets representing 10% or more of balance sheet value, acquisition of defense- or energy-related land, or acquisition of rights providing decisive influence over the target’s activities.

Both bills share a common architecture: corporate control thresholds combined with an asset-value trigger. The sectors covered largely correspond to the mandatory minimum under the new EU Regulation — critical infrastructure, defense-related activities, and strategic raw materials. Neither bill currently covers the full range of sectors addressed by the new Regulation, including semiconductor research, AI systems relevant to defense, and certain digital infrastructure categories. Alignment with the EU benchmark will require either amendment or broad interpretation of the Cabinet of Ministers’ sector lists once enacted.

Reading the two bills alongside the new EU Regulation reveals three categories of transactions that currently fall outside mandatory screening. For investors considering entry into Ukraine, these represent genuine structuring options today — but each carries a legislative risk that needs to be factored in.

Entry Point One: Intangible asset transactions

Both bills define their asset-based screening triggers in terms of основні засоби — fixed assets (tangible property: buildings, machinery, equipment). Intangible assets — intellectual property, source code, algorithms, databases, trade secrets — fall entirely outside this trigger. A transaction structured as an IP licensing agreement, a technology transfer, or a patent portfolio acquisition — without acquiring any corporate stake in a Ukrainian company — does not trigger mandatory screening under either bill as currently drafted.

For investors whose primary interest is access to Ukrainian technology rather than ownership of Ukrainian enterprises, this creates a structuring option that avoids the screening process entirely. A licensing agreement for navigation software, a transfer of manufacturing know-how, or a joint R&D arrangement where a Ukrainian partner contributes existing algorithms — none of these trigger either bill’s notification requirement.

The legislative risk is real. The new EU Regulation explicitly acknowledges that transfers of intangible assets can undermine security, and the minimum harmonization principle permits Ukraine to extend screening to such transactions at the national level. Any future amendment closing this gap may apply prospectively, including to ongoing licensing relationships. Investors using this entry point should structure agreements with termination and renegotiation provisions that account for this contingency.

Entry Point Two: Greenfield joint ventures

Neither bill covers greenfield investments — the creation of a new enterprise from scratch. A foreign investor establishing a new joint venture with a Ukrainian partner who contributes existing technology, know-how, or source code falls outside the screening triggers of both bills. The foreign investor technically acquires nothing — no corporate stake in an existing company, no qualifying assets — and therefore avoids any notification obligation.

In the Ukrainian reconstruction context, greenfield joint ventures are likely to be a common entry structure: they allow foreign investors to isolate themselves from the liabilities and legacy issues of existing Ukrainian enterprises, and the current screening gap makes this structure even more attractive from a regulatory standpoint. The gap may not be permanent, however. The new EU Regulation defines greenfield investments for the first time, and Ukraine’s accession trajectory creates pressure to extend coverage to such structures in sensitive sectors.

Entry Point Three: Transactions below the asset threshold

Both bills set an asset-value trigger at 10% or more of the target’s fixed-asset balance sheet value. Transactions that acquire assets below this threshold — or acquire assets not classified as fixed assets under Ukrainian accounting standards — fall outside the trigger. For investors acquiring specific equipment, technology components, or infrastructure elements that represent less than 10% of a target’s balance sheet, this creates a screening-free acquisition path even within otherwise covered sectors.

The regulatory uncertainty is real, but it is bounded. The new EU Regulation sets a floor on what any durable Ukrainian screening law can look like, and the range of likely legislative outcomes has narrowed considerably.

Build screening conditions into deal documents from the term sheet. Once a screening law is enacted, notification will become a condition precedent to closing in defined sectors. Long-stop dates, termination rights, and walk-away provisions all need to reflect that condition. Treating screening as a closing formality to be handled after signing is a structural mistake that is already visible in some reconstruction-adjacent transactions being structured today. Proper investment structuring addresses these conditions from the outset.

For technology and IP transactions, conduct a dual analysis. The formal answer to ‘is this notifiable?’ may currently be no, but the substantive risk profile is a separate question. Transactions involving dual-use technology, defense-adjacent know-how, or strategic data remain exposed to challenge under sanctions law and export control frameworks regardless of whether a screening law applies. A thorough legal due diligence process for any technology-related transaction in Ukraine should address both the current screening position and the forward-looking legislative risk.

Price legislative risk into the transaction structure. For transactions using any of the three entry points identified above, the structuring work does not end at closing. Change-of-law clauses, renegotiation triggers, and exit provisions tied to regulatory change are standard tools for managing this kind of forward-looking risk.

Watch the institutional design question. The quality of a screening regime in practice depends less on the formal sector list than on the institutional culture of the authority applying it. The Ministry of Economy model, indicated by Cabinet Resolution No. 97, will shape how the regime operates regardless of which bill is enacted. For investors assessing regulatory risk when investing in Ukraine, understanding that institutional direction is part of the analysis.

Ukraine is building its FDI screening regime at a moment when the EU benchmark itself has just been reset. The alignment pressure from the accession process will eventually close many of the current gaps. The question is whether Ukraine closes them by design — in this legislative cycle — or by revision, under accession conditionality, after the costs of misalignment have already been incurred.

For investors structuring transactions now, that question shapes the risk profile of every deal in the sectors the new Regulation defines as mandatory — and of every technology transaction that currently falls below the formal screening threshold but sits above the threshold of strategic sensitivity.