Key Takeaways from the “Defence Tech: Legal Challenges for the Industry” Conference

AVELLUM and Polikarpov Law Firm co-hosted the “Defence Tech: Legal Challenges for the Industry” conference in Kyiv on July 10, 2024. The event brought together company founders, investors, and in-house lawyers to discuss current legal challenges and solutions for developing and scaling the defence tech sector in Ukraine.

We addressed the critical legal issues for defence tech companies in Ukraine, including intellectual property strategy, setting up a holding structure in line with export control requirements, regulating relations between founders and investors, defence procurement, and the consequences of violating defence legislation.

Mechanisms for protecting intellectual property

Lawyers Anton Polikarpov and Anastasia Shevchuk from Polikarpov Law Firm, alongside forensic expert and patent attorney Serhiy Petrenko underscored the importance of protecting trademarks, industrial designs, inventions, and copyrights. Sufficient intellectual property protection is critical for ensuring security and supporting innovation in the defence industry. The speakers discussed the procedures for registering intellectual property, including national and international mechanisms.

We focused on the application of international systems such as the Madrid Protocol. This system simplifies and speeds up registering trademarks abroad, reducing the time required to obtain protection.

We also discussed agreements, including licensing and non-disclosure agreements (NDAs), which are crucial for protecting and commercialising know-how in the defence industry. The effective use of such contracts provides robust legal protection for intellectual property and helps safeguard confidential information.

Corporate structuring, export control, and relations between founders and investors

Anton Zaderyholova, partner of Tax and Private Client Practices at AVELLUM, highlighted the tax aspects of structuring defence tech companies. He discussed essential issues when choosing an optimal holding structure with a foreign jurisdiction, including vital financial flows and the business’s operational structure. Creating an optimal holding structure helps optimise business processes and may simplify attracting investment.

Andriy Romanchuk, partner of Corporate Practice and head of Defence and Miltech at AVELLUM, and Mykola Stetsenko, managing partner of AVELLUM and head of Corporate Practice and M&A, discussed export control and structuring relations between founders and investors. They explained the main export control requirements in Ukraine and the circumstances in which this is important for Ukrainian defence tech companies.

We also discussed contractual instruments for attracting investment and managing corporate relations between founders and investors. The suitable instruments will help avoid potential conflicts in the future.

State regulation of military technologies and liability for violations

Andriy Romanchuk explored issues of state regulation of military technologies. We shared insights on how public defence procurement currently operates in Ukraine, how to prepare for it, and what factors need to be considered in negotiations with state customers. We also discussed product codification, the way it works, and possible import control issues when importing components into Ukraine. Defence tech companies must understand these processes to implement projects in Ukraine successfully.

Vadym Medvedev, partner of AVELLUM’s Tax and Litigation Practices, addressed the issue of liability for legislation violations in military technologies. As a follow-up to the discussion of state regulation, we shared the potential consequences of violations. We examined essential cases that have arisen since the full-scale invasion of Ukraine. Understanding these issues is necessary for complying with defence legislation requirements.

Summary

We discussed the key regulatory areas in the defence tech sector in Ukraine. Our goal was to create a comprehensive understanding of the regulatory areas relevant to defence tech companies in Ukraine. This will lay the formal foundation for successful scaling, attracting investment, and supplying the Defence Forces.

We believe in a solid technological sector in Ukraine that will strengthen Ukraine’s national security and the entire democratic world. We are grateful to all the speakers and participants who made this event effective.