Investor alert: Ukraine to introduce screening mechanism for foreign direct investments
On 22 September 2025, the Ukrainian Parliament registered draft law No. 14062 "On Screening of Foreign Direct Investments" (Draft Law)[1]. The Draft Law introduces a mandatory foreign direct investments (FDI) screening mechanism to assess whether investments in sensitive sectors may threaten Ukraine's national security or interests.
This is the second attempt to introduce an FDI regime in Ukraine – in 2020 the Ministry of Economy prepared draft law No. 5011 "On the Procedure for Making Foreign Investments in Business Entities of Strategic Importance for the National Security of Ukraine," which never reached parliamentary readings, having been returned for revision.
Screening Authority
The FDI screening will be administered by the Commission on the Assessment of the Impact of Foreign Direct Investments (Commission), established within the Ministry of Economy. Among other powers, the Commission will review FDI applications and decide whether to (i) approve, (ii) conditionally approve, or (iii) prohibit a transaction.
The Commission will be headed by a chair and supported by one representative of each (i) the Security Service, (ii) the Foreign Intelligence Service, (iii) the Ministry of Foreign Affairs, and, where relevant, (iv) the competent sectoral authority responsible for critical infrastructure protection. The State Service for Special Communications and Information Protection will support the Commission in detecting transactions subject to screening.
Sectors
Investments in entities active in the following sectors will be subject to screening:
- operation of critical infrastructure (entities listed in the Register of the Critical Infrastructure Assets)
- extraction of metallic ores and non-metallic minerals of strategic importance (aluminium, beryllium, copper, nickel, niobium, strontium, tantalum, titanium, uranium and zirconium ores, as well as fluorite)
- development, production, modernization, repair, transportation, disposal and trade of military goods and dual-use items
Notifiable Transactions
The following types of transactions will trigger a notification obligation:
- direct or indirect acquisition of more than 25% of voting rights
- acquisition of 10 % or more of the book value of fixed assets
- direct or indirect acquisition of right (i) to appoint the sole executive body and/or more than 50 % of the collegial executive body; and/or (ii) to elect more than 25 % of the supervisory board; and/or (iii) to block decisions of the management bodies
- other transactions aiming at carrying out foreign direct investments in an entity
Timing of Review
The review of an application for FDI approval includes two stages:
- Assessment phase: In the first phase the Commission determines whether a transaction is subject to screening. Upon receipt of the application, the Commission will have up to 60 days to assess its completeness. The Commission may send a request for additional information (RFI) to the foreign investor; the deadline to respond to the RFI will be 20 days. If the application is completed, the Commission will have, within 5 business days, to notify the foreign investor of (i) the initiation of the screening procedure or (ii) the conclusion that the transaction is not subject to screening.
- Screening phase: The review of an application cannot exceed 90 days from the date of the decision to initiate the screening. Upon initiation, where needed, the Commission will have 30 days to send the RFI to public bodies; the deadline to respond to the RFI will be 30 days. The Commission will have exclusive discretion to either (i) approve the transaction or (ii) approve the transaction with conditions, or (iii) prohibit the transaction.
Inherently Prohibited Transactions
Transactions cannot be approved if, within the last two years, the foreign investor (or its founders/ultimate beneficial owners):
- had FDI linked to russia or other sanctioned states
- was subject to sanctions
- held russian citizenship
- had property interests in russia
Ongoing Reporting
The Draft Law provides for the Commission's right to continuously collect and analyse data on foreign investors who have obtained clearance for FDI. Foreign investors will be required to regularly provide updated data, including changes in its ownership structure, as well as annual reports, which will be recorded in the Register of Foreign Investors.
Sanctions for Non-Compliance
A foreign investor may face serious sanctions if it provides false or incomplete information in connection with the application. If such information is identified after clearance has been granted but before implementation of the transaction, the Commission may prohibit the transaction. If such information is identified after clearance has been granted and the transaction has already been implemented, the Commission may impose the following measures:
- suspension of the voting rights
- deprivation of the right to receive dividends
- invalidation of the transaction
If a foreign investor fails to notify a notifiable transaction, implements the transaction contrary to the Commissions' prohibition decision, or fails to submit ongoing reporting the following measure may be imposed:
- suspension of voting rights
- deprivation of the right to receive dividends
- invalidation of the transaction
- imposition of a fine of up to 50% of the value of the investment
FDI and Merger Control
The Draft Law also proposes amendments to the Law of Ukraine "On Protection of Economic Competition," making the Commission's clearance (or its decision that a transaction is not subject to screening) a prerequisite for obtaining merger control clearance from the Antimonopoly Committee of Ukraine (AMC).
In practice, this means that if the transaction triggers the Ukrainian FDI screening regime, obtaining merger control clearance in Ukraine will take longer, as FDI approval must be secured before the AMC can issue its decision. This diverges from the approach in many EU countries, where FDI screening and merger control may proceed in parallel.
Entry into Force
If adopted, the law will enter into force six months after its official publication. Its provisions will not apply to transactions implemented before its entry into force.
What is Ahead?
The registration of the Draft Law is a clear signal that Ukraine is moving to align with global, and in particular European, practice in safeguarding national security through the screening of foreign investments in sensitive sectors. Although implementation of Regulation (EU) 2019/452 (the FDI Screening Regulation) is not yet an accession requirement, the adoption of a screening regime will surely be seen by the European Commission as a positive step.
For foreign investors, the key takeaway is timing: the content of the Draft Law will likely undergo some changes during parliamentary readings, potentially bringing it closer to the EU framework. If prioritised by Parliament, it could be adopted by the end of 2025 and become effective by mid-2026 – possibly extending deal timelines, as FDI clearance will be required before merger control review.
[1] The text of the Draft Law is publicly accessible via the Verkhovna Rada of Ukraine's website at https://itd.rada.gov.ua/billinfo/Bills/Card/57344 [in Ukrainian].
For further information, please contact Asters' Partner Igor Svechkar, Counsel Sergiy Glushchenko and Senior Associate Anastasiia Panchak.
