Date of publication: 17 February 2026
Dmytro Hruba, Attorney
Source: Nadra.info
Ukraine possesses significant reserves of strategic resources, including titanium, graphite, lithium, uranium, and rare earth metals. It is often said that Ukraine’s future reconstruction and economic recovery will largely be linked to the extraction of such resources, as this could enable Ukraine to double its GDP over the next decade.
Legal Aspects of Lithium Extraction in Ukraine
Lithium is a strategic raw material for the production of batteries for smartphones, electric vehicles, and laptops, as well as for use in the aviation, chemical, and defense industries, etc. In the context of the global energy transition and the reorientation of supply chains, Ukraine, which potentially holds some of Europe’s largest lithium reserves, is gaining particular importance as a jurisdiction for foreign investors.
At the same time, the development of mineral deposits in Ukraine is associated with a complex regulatory regime in the field of subsoil use, land relations, and environmental protection. For foreign investors, not only access to the resource base is key, but also legal predictability and the possibility of effective investment protection.
Lithium ores are classified as minerals of national importance; therefore, the right to use them may be granted exclusively on the basis of a special subsoil use permit.
Promising Lithium Deposits in Ukraine
According to expert assessments, Ukraine is among the European countries with the largest proven and projected reserves of lithium ores. The main promising lithium deposits in Ukraine are concentrated in:
- Kirovohrad region: Polokhivske and Dobra lithium deposits;
- Donetsk region: Shevchenkivske lithium deposit;
- Zaporizhzhia region: Kruta Balka lithium deposit (near the Sea of Azov).
N. B.: the latter two are currently located within temporarily occupied territories.
Since 2017, the Ukrainian company LLC “UkrLithiumMining” has held the right to develop the Polokhivske lithium deposit (special subsoil use permit).
Another Ukrainian company, LLC “Petro-Consulting”, attempted to obtain a permit for the development of the Dobra lithium deposit. However, in 2020, the Ukrainian Geological Survey (The State Service of Geology and Mineral Resources of Ukraine – SSGSU) refused to grant the said company the permit. Court proceedings challenging this refusal are currently ongoing.
At the same time, the Cabinet of Ministers of Ukraine has included the Dobra lithium deposit in the list of subsoil plots (mineral deposits) of strategic and/or critical importance to be granted for use through a tender procedure for entering into a production sharing agreement. In addition to lithium, the site contains associated minerals: tantalum, niobium, rubidium, cesium, beryllium, and tin.
The Kruta Balka lithium deposit and the Shevchenkivske lithium deposit have been included by the Cabinet of Ministers of Ukraine in the list of subsoil plots (mineral deposits) of strategic and/or critical importance to be granted for use through an auction (electronic bidding) for the sale of a special subsoil use permit.
How Can a Foreign Investor Obtain a Permit for Lithium Extraction in Ukraine?
As a general rule, in Ukraine, foreign legal entities and individuals have the right to use subsoil resources on equal terms with residents of Ukraine. Thus, there are no formal restrictions for foreign investors in the field of lithium extraction. The exception applies to persons associated with the aggressor state.
At the same time, for example, in the case of a production sharing agreement, the legislation requires a foreign investor to register its representative office in Ukraine within three months from the date of conclusion of such an agreement.
Acquisition of a Special Subsoil Use Permit at Auction
The right to develop lithium deposits is acquired by obtaining a special subsoil use permit issued by the State Service of Geology and Mineral Resources of Ukraine.
Such a permit may be obtained as a result of its purchase at auction, if the relevant subsoil plot is included in the list of mineral deposits to be granted for use through an auction (examples include the Kruta Balka and the Shevchenkivske deposits).
The auction is conducted through electronic bidding using a two-level automated information and communication system that ensures the creation of documents and their exchange in electronic form.
The auction winner is the participant who offers the highest price bid as a result of the auction. A sale and purchase agreement for the special subsoil use permit is concluded between the auction winner and the StateGeoSubsoil.
The special permit specifies:
- the subsoil plot;
- the type of use (geological exploration, pilot industrial development, extraction);
- the term of the permit, etc.
N. B.: subsequently, such a permit may be alienated by the subsoil user on the basis of a sale and purchase agreement or contributed to the charter capital of a business entity established with its participation.
The law also provides for the possibility of extending the term of the special permit and introducing amendments thereto.
What Is a Production Sharing Agreement (PSA) and Why Is It Beneficial for Investors?
An alternative model is the conclusion of a Production Sharing Agreement (PSA) in accordance with the Law of Ukraine “On Production Sharing Agreements”.
Under a production sharing agreement (PSA):
- the state grants the investor the right to search for, explore, and extract minerals;
- the state ensures the granting to investors, and facilitates the granting to their contractors, subcontractors, and other organizations (persons), of approvals, quotas, special subsoil use permits and licenses for activities related to the search (exploration) and exploitation of mineral deposits, mining allotment acts, documents certifying land use rights, etc.;
- the investor carries out activities at its own expense and risk;
- the extracted production is distributed between the state and the investor in proportions defined by the agreement.
For a foreign investor, a PSA is an attractive model due to:
- contractual stability of the fiscal regime;
- the possibility to fix special conditions of taxation, customs regime, and currency regulation;
- an increased level of protection against unilateral changes by the state to the project conditions.
Legal Specifics of the Production Sharing Agreement Mechanism
At the same time, the PSA mechanism is procedurally more complex and provides for a competitive procedure conducted by the Cabinet of Ministers of Ukraine.
The main stages of this process are:
- announcement of the tender and participation therein;
- negotiation of the agreement terms between the tender winner and the state;
- implementation of the PSA.
To address issues related to the organization of the conclusion and performance of production sharing agreements, the Cabinet of Ministers of Ukraine establishes the Interagency Commission. The decision to hold a tender for entering into a production sharing agreement is adopted by the Cabinet upon submission of the interdepartmental commission, specifying the subsoil plot (deposit or part thereof) for which the tender is announced and several defined tender conditions.
Tender participants submit applications for participation, indicating and providing documentary confirmation of, in particular:
- information about the participant or participants;
- information on experience in the field of subsoil use, as well as data on technical and financial capabilities to perform the works and on the technologies to be applied in subsoil use;
- a work program for the subsoil plot, including compliance with the main tender conditions, specifying measures aimed at subsoil and environmental protection, as well as the start and completion dates of the works;
- amounts and types of investment, etc.
The review and evaluation of applications is carried out by the Interagency Commission according to defined criteria:
- the work program for the subsoil plot ensures the most rational use of natural resources;
- technological solutions for conducting operations are the most efficient;
- optimal environmental protection measures are ensured;
- investment conditions are more attractive;
- sufficient financial capacity and international experience of the participant to implement the work program and investments, as detailed in the tender conditions or tender documentation.
Based on the review and evaluation, the Interagency Commission prepares conclusions and proposals regarding the determination of the winner. The tender winner is determined by the Cabinet of Ministers of Ukraine, taking into account the proposals of the Interagency Commission.
The next stage envisaged by law is negotiations between the winner and the state regarding the terms of the agreement. The draft agreement is prepared by the investor, taking into account the broad list of essential terms defined by law.
The draft must be prepared and submitted for consideration within three months from the date of publication of the tender results.
Thereafter, the “ball” passes to the state, which, within the next three months, must provide feedback in the form of its conclusions and comments or a new version of the agreement.
On issues not agreed upon by the parties within six months from the date of registration of the first version of the draft agreement, additional or repeated assessments or expert examinations may be conducted at the initiative and expense of one of the parties. The law provides for the investor’s right to apply to well-known international non-governmental organizations or specialized scientific institutions.
After all terms have been agreed, the agreement is signed and registered, followed by its publication. The agreement is concluded for a term of up to 50 years.
Disputes between the parties to a production sharing agreement may be considered by the courts of Ukraine, unless the parties have otherwise agreed, for example, by submitting the dispute to international arbitration.
Land Aspect of Subsoil Use in Ukraine: Advice for Investors
The existence of a special subsoil use permit or the conclusion of a production sharing agreement does not automatically grant the right to use a land plot. A foreign investor must separately regulate land relations, for example, by leasing land or acquiring it, if permitted in the specific situation.
In the case of production sharing agreements, upon the investor’s request and where the required land plots are in state or municipal ownership, subsoil plots (mineral deposits) are granted together with such land plots.
However, in practice, the granting of such plots may be complicated by several legal procedures and specific features inherent in land legislation (termination of rights of current land users, adoption of some decisions regarding the transfer of the said land plots, etc.).
A separate and lengthy settlement will be required where the land plots necessary for subsoil use are privately owned.
What Are the Legal Risks of Investing in Lithium?
The main legal risks of investing in the development of lithium deposits in Ukraine include:
- regulatory risks: changes in taxation conditions, subsoil use regulations, etc.;
- licensing risks: challenging or revocation of a special permit on formal grounds;
- land risks: disputes with landowners or land administrators regarding obtaining or using land;
- environmental risks: blocking of projects due to violations of environmental impact assessment (EIA) procedures.
Separately, I would also highlight war-related risks and options for their insurance.
N. B.: minimizing such risks requires comprehensive due diligence of the future investment, its structuring, and thorough preparation of the agreement.
It is also noteworthy that in the case of a PSA, the state guarantees that the legislation in force at the time of conclusion of the agreement will apply to the rights and obligations of the investor defined by the production sharing agreement throughout its term (except for legislation improving the investor’s position, as well as legislation on defense, national security, public order, and environmental protection).
Development of Lithium Deposits in Ukraine: Prospects for Foreign Investors
The development of critical resource deposits, including lithium, in Ukraine by a foreign investor is legally feasible and potentially highly profitable given the strategic nature and high demand for such materials. At the same time, such activities take place in a complex legal environment combining mining, land, environmental, tax, investment, and other regulations.
Issues of the legal regime of subsoil use, investment protection, and land relations constitute the subject of the practical work of Ilyashev & Partners Law Firm in projects related to mineral extraction in Ukraine.
A key success factor is not only obtaining a special permit, but also the proper structuring of the investment model, legally flawless formalization of legal relations with the state and counterparties, as well as the use of international investment protection mechanisms.
In the near future, such projects may become one of the most attractive niches for foreign capital in the natural resources sector in Ukraine.
