UKRAINE INTENDS TO REGULATE ADMISSIBILITY OF FOREIGN INVESTMENTS IN STRATEGIC INDUSTRIES

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UKRAINE INTENDS TO REGULATE ADMISSIBILITY OF FOREIGN INVESTMENTS IN STRATEGIC INDUSTRIES

On 20 January 2021, the Cabinet of Ministers of Ukraine approved the Draft Law “On Foreign Investments in Companies Having Strategic Importance for Ukraine’s National Security” (“Draft Law”).

Draft Law seeks to introduce a screening procedure for foreign investments in companies that are active in industries of strategic importance for Ukraine’s national security. To establish whether a foreign investment triggers the screening procedure, an investor would have to:

1. Check if the target company is active in a strategic industry. So far, the suggested list of such industries covers around 40 industries and includes business activities related to:

  • nuclear energy & waste
  • weapons, ammunition & explosives
  • aviation & space exploration

2. Check the investment type. Draft Law provides for a wide definition of a “foreign investment” that includes the acquisition of:

  • shares / assets
  • rights to appoint executive bodies
  • management rights, and others.

Draft Law sets different triggering thresholds for the screening requirement depending on the investment type. For example, the acquisition of more than 25% of votes in a strategic company would be subject to prior screening.

3. Аpply to a special commission for an investment approval, if the foreign investment meets requirements described in items 1 and 2. Prior to such approval, foreign investors are subject to a standstill obligation.

Draft Law also suggests changing the Ukrainian merger control rules. In particular, the Ukrainian competition authority would not be able to grant merger clearance, unless the special commission had cleared an investment transaction.

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