By Resolution No. 1304 of 21 October 2026, the Cabinet of Ministers of Ukraine expanded the scope of the experimental framework for constructing defence industry production facilities by amending the Procedure for Implementing the Experimental Project for New Construction of Production Facilities and Reconstruction and Major Repair of Existing Buildings and Structures of State-Owned Enterprises and Business Companies of the Defence Industry, approved by Resolution of the Cabinet of Ministers of Ukraine No. 1494 of 19 November 2025 (the "Procedure").
The Procedure already provided defence industry enterprises with streamlined land and permitting procedures, concurrent design and construction, connection to utility supplies without a document certifying the commissioning of the facility, and special arrangements for the commissioning of facilities.
The amendments extend these arrangements, subject to certain specific features, to the construction of underground production infrastructure and functionally connected above-ground facilities where another legal entity, such as a private developer or investor, acts as the construction customer. The amendments also regulate the transfer of completed facilities to defence industry enterprises, broaden the range of enterprises eligible to use the framework and introduce safeguards for the enterprises’ use of the facilities constructed.
Involvement of private construction customer
Previously, only the defence industry enterprise itself could act as the construction customer. This role may now be performed by another legal entity which, in its own name, using its own and/or raised funds and at its own risk, procures the construction of:
underground production infrastructure facilities;
above-ground buildings, structures and structural elements functionally connected with those facilities.
The latter include, in particular, facilities supporting the construction, operation, maintenance, protection, sheltering or concealment of underground production facilities.
NB! A third-party construction customer may use the framework only for the facilities listed above. It does not extend to the construction of other production facilities (above-ground workshops, warehouses, boiler houses, etc.).
The completed facilities, or parts thereof, are transferred to the defence industry enterprise into ownership, under a lease or under another right in rem.
It is a mandatory condition that the construction customer holds the rights to the land plot, building or structure required by law to perform the functions of a construction customer, or has been authorised to perform those functions by the owner or user of the relevant land plot or real property. Where the purchase, withdrawal or allocation of land plots is required, the associated costs must likewise be borne by the construction customer, without recourse to the state or local budgets.
The private construction customer must also arrange design supervision and technical supervision.
Broader Eligibility Criteria for Defence Industry Enterprises
The framework now applies to defence industry enterprises meeting at least one of the following criteria:
they hold Defence City resident status;
they are listed in the annex to the Procedure or were established through the reorganisation of an enterprise so listed;
they are entered in the electronic register of selection participants and contractors under state contracts (agreements);
they have been designated by the Ministry of Defence as critically important to the functioning of the economy within the defence industry during a special period, or to meeting the needs of the Armed Forces and other military formations during a special period.
Previously, entry in the register and designation as a critically important enterprise were cumulative requirements. They now constitute separate, alternative grounds for applying the Procedure. A third-party construction customer must enter into an agreement with an enterprise meeting at least one of the prescribed criteria.
A third-party construction customer must enter into an agreement with an enterprise meeting at least one of these criteria.
The amendments also protect projects where a defence industry enterprise ceases to meet the eligibility criteria during project implementation. In particular, loss of Defence City resident status, removal from the register or loss of critically important status does not prevent the Procedure from applying until construction is completed and the facility is commissioned and, where another legal entity acts as the construction customer, until the facility is transferred to the defence industry enterprise. Ceasing to meet the eligibility criteria likewise does not constitute grounds for terminating or amending the agreement.
Mandatory agreement and ministry of defence review
A third-party construction customer may use the simplified framework on the basis of a civil law agreement with a defence industry enterprise concluded before construction works commence.
The agreement must specify:
the construction customer’s obligation to procure construction and transfer the facility or part thereof, and the enterprise’s obligation to accept it;
the right under which the facility is to be transferred to the enterprise, together with the conditions for, and the time of, the creation of that right;
the description and floor area of the relevant part of the facility, where only part is to be transferred;
the time limits and procedure for transfer;
the period of use and the rules for its extension, where the transfer provides for use for a fixed term;
the designated use of the facility for accommodating, relocating and/or expanding the enterprise’s production capacity.
No later than one month before the planned conclusion of the agreement, the construction customer must submit the draft agreement and documents demonstrating compliance with the prescribed requirements to the Ministry of Defence. The Ministry reviews them within five working days and notifies the applicant of the outcome.
Where non-compliance is identified, the Ministry of Defence must specify the deficiencies and how they are to be remedied and allow at least five working days from receipt of the notification to remedy them. Until the deficiencies are remedied, the Procedure does not apply to the construction. Any repeat review follows the same procedure, and deficiencies already remedied may not be raised again.
Minimum floor area and safeguards for defence industry enterprises
Where part of a facility is transferred to a defence industry enterprise, that part must:
comprise at least 25% of the total floor area of the construction project;
be functionally suitable for accommodating, relocating and/or expanding production capacity.
Where the facility is leased or otherwise made available for a fixed term, the term must be at least one year from the date of transfer. The enterprise is also entitled to require that its use be extended until martial law is terminated or lifted, and the construction customer must comply with that requirement.
Restrictions applicable to construction customer and their obligations
The Procedure restricts participation by legal entities connected with the aggressor state, its legal entities, citizens or residents. In particular, equity interests of 10% or more are taken into account, having regard to control relationships, as are membership and ultimate beneficial ownership (subject to the exceptions specified in the Procedure).
Legal entities are also ineligible to use the simplified procedure where they or their ultimate beneficial owners are subject to sanctions under the Law of Ukraine “On Sanctions” or are included in the relevant lists of persons connected with terrorist activities or subject to international sanctions.
Entry into force, duration and specific features of application
The amendments entered into force on 23 October 2026 and apply within the experimental project, which runs for two years from the entry into force of Resolution of the Cabinet of Ministers of Ukraine No. 1494.
The simplified procedure is available where construction commences:
during martial law; and
before the experimental project ends (i.e. before 25 November 2027).
If construction of a facility is not completed by that date, the Procedure (including the amendments) continues to apply to it.
Practical implications for businesses
The amendments create a model designed both to meet the needs of defence industry enterprises and to open up opportunities for cooperation with the private sector. In particular, defence industry enterprises may attract funds, land plots and real property from private parties to create protected production capacity. This allows them to accommodate, relocate or expand the required capacity quickly, without budget funding and without having to find their own site, while shifting the costs and risks of construction to the private partner. The private sector, in turn, gains access to a simplified regime previously available only to defence industry enterprises themselves. Investors may monetise their own assets and independently negotiate key commercial terms, including the form of transfer of the facility, the price or rent, and the allocation of floor area above the mandatory 25%. When structuring such projects, particular attention should be paid to rights to the land and to the facility being created.
