Date of publication: 29 July 2025
Dmytro Hruba, Attorney at Law
Source: Ukrainian Law Firms 2025
Ukraine produces about 34% of its weapons domestically, according to the latest official data. This figure has never exceeded 10% of the country’s total needs. However, even current production volumes are clearly insufficient to ensure the country’s defense capabilities in the face of a protracted war and constant geopolitical challenges.
PPPs in Defense: is Ukraine Ready?
Ukraine’s security and defense needs require private capital, technology and expertise. Public-private partnership (PPP) is in this regard one of the promising mechanisms. Likewise, investors may also benefit from public-private partnership by obtaining state guarantees, certain budget financing, adjacent infrastructure construction by the state, etc.
At the same time, public-private partnership is not just about the manufacturing of weapons, as the security and defense sector is much broader. Several countries have acquired extensive experience using the private sector in cybersecurity, intelligence, critical infrastructure protection, etc., through public-private partnerships.
The United States, United Kingdom, Germany, and France, have all demonstrated the benefit of involving the private sector in defense projects.
Ukraine’s Legislative Framework for PPP
Public-private partnerships are permitted in Ukraine in the areas of heat transfer and supply, natural gas distribution and supply, mechanical engineering, highways, roads, railways, runways, bridges, overpasses, tunnels and undergrounds, sea and river ports, as well as their infrastructure, according to Ukraine’s Law on Public-Private Partnership.
There is no direct provision in the law for the use of PPPs in security and defense.
PPPs may, however, be used in other fields involving the provision of socially significant services if the public partner deems them appropriate. A broad and vague definition like this does not answer the question: “Can security and defense be considered such services?”
According to the Law On National Security of Ukraine, PPP mechanisms can be used as part of the implementation of the National Security Strategy of Ukraine, the Defense Industry Development Strategy of Ukraine, the Cybersecurity Strategy of Ukraine, etc., which were approved in 2021.
Under such conditions, it can be concluded that public-private partnership mechanisms and instruments are generally suitable for use in the security and defense sector, although certain limitations need to be taken into account.
For example, public-private partnership cannot currently be used in areas of economic activity that, according to this law, are permitted by law to be carried out exclusively by state enterprises, institutions and organisations; a PPP asset in the form of a concession cannot be state and municipal property used in the manufacture and repair of all types of weapons in service with the Armed Forces of Ukraine, the Security Service of Ukraine, etc.
Security and Defense PPP Examples
Public-private partnerships are used in Ukraine’s security and defense sector, according to open data analytics. A recent agreement between Ukrainian Defense Industry JSC and Roshel, a Canadian company, or a similar agreement with Amentum Services, Inc., a U.S. company, are successful examples.
As part of its strategic development of military digital capabilities, the Ukrainian Ministry of Defense has also announced the establishment of the state enterprise Digital Army. This enterprise will interact with the private sector in Ukraine and abroad in an effective manner, including developing digital capabilities for the military.
Current legislative regulation on this issue is too general, superficial, and outdated, and needs to be thoroughly revised. However, such partnerships are being increasingly applied in practice.
The first recommendation to an investor is to thoroughly examine the fundamental feasibility of a public-private partnership in the context of a specific security and defense project.
The second recommendation to consider is that of property issues.
PPP Property Issues
A public-private partnership involves the creation and construction of assets (new constructions, reconstructions, restorations, overhauls, and technical re-equipment) as well as their management (use, operation, maintenance).
In particular, Article 7 of the Law of Ukraine On Public-Private Partnership sets forth certain restrictions on new and reconstructed assets that are operated within a public-private partnership, including:
- An investor in a public-private partnership generally does not acquire title to the real estate that is being constructed or reconstructed;
- Such real estate will only be used by the private partner;
- Property rights can be disposed of (leased to other parties or pledged) only with the consent of the public partner;
- PPP agreements may specify that the private partner has a right to lease a part of the property included in the asset, but the right and procedure for leasing such property must be clearly outlined in the agreement;
- Private partners own the moveable property acquired as part of the public-private partnership agreement, unless otherwise specified;
- During the implementation of a public-private partnership agreement, the public and private partners may share ownership of the created (newly constructed) PPP assets.
The Law of Ukraine On Concession specifies that real estate constructed by the concessionaire (private partner) in accordance with the concession agreement belongs to the state or municipality.
In other words, a private partner cannot claim common ownership of an asset constructed under a concession.
Investors may not find these restrictions particularly attractive, but they should be taken into account when planning a partnership with the state. The state should probably reconsider its approach to resolving property issues related to public-private partnerships in order to liberalize regulation.
The peculiarities of managing state property in the defense sector should also be considered when planning a public-private partnership.
The state property assets in the defense industry, include, in particular: property of state defense industry enterprises, including state companies within the State Concern Ukrainian Defense Industry, property that has been transferred to Ukrainian Defense Industry JSC (formerly the State Concern Ukrainian Defense Industry), etc.
A public-private partnership using defense industry property may need the approval of several management entities, including Ukrainian Defense Industry JSC and the Cabinet of Ministers of Ukraine.
In the Ukrainian system of executive authorities, the Cabinet of Ministers is the highest collegial body, so obtaining such consent can be complex and time-consuming.
Under certain conditions, it is also necessary to consider the peculiarities of managing strategic facilities for the state’s economy and security. The Cabinet of Ministers of Ukraine approved the list of state strategic facilities on 4 March 2015 under Resolution No. 83, and the regulation of their activities certainly has its own unique features.
These and other property issues of public-private partnership in the security and defense sector should be studied thoroughly as part of the legal due diligence of any future project, necessarily in the context of its specific conditions.
PPP land Issues
Land use registration is crucial for the implementation of security and defense projects. Public-private partnerships in the defense sector cannot be implemented without addressing land issues at the planning and preparation stage, which, in particular, include:
- An in-depth legal due diligence of specific land parcels (if any) and real estate assets located within a public-private partnership;
- Identification and termination of current land users’ rights (if any);
- Development, coordination and approval of land use documentation, change of the intended purpose of a land plot;
- Obtaining a decision from the authorised authorities on granting a land plot for use, registration of title to them, etc.
For the duration of a public-private partnership agreement, a private partner may apply for a land plot that is necessary for the implementation of the partnership, including on a concession basis.
Meanwhile, it only refers to general norms in this regard and, generally, refers to the provisions of the relevant code regarding the regulation of land use issues within the framework of public-private partnerships.
The Land Code of Ukraine contains a number of features regarding the registration of a private partner’s title to a land plot, in particular:
- the transfer of land for lease under a public-private partnership is carried out without a tender, i.e. without holding land auctions;
- shifts certain procedures for the development and approval of land use documentation to the public partner with compensation for financial costs by the private partner;
- sets restrictions on the turnover of land plots specified in the decision on the feasibility of implementing a public-private partnership;
- provides for the possibility of cancelling the title of a certain group of land users to the land plot that will be used within the framework of a public-private partnership, without their approval;
- sets the timeframe within which land plots must be transferred to the private partner, etc.
Land use issues can be resolved quite lengthy and delayed by both the public partner and the landowner (usually different people), and the law often specifies a declarative timeframe for resolving them. It is also possible to transfer some issues to a private partner in practice.
It is important to keep all of the above in mind when planning a public-private partnership, particularly when negotiating the terms of the future agreement, including the procedure for fulfilling obligations and the consequences of breaching them.
For the purpose of determining a private partner, the Law provides that the public partner may take a number of measures, including forming and registering the state title to the land plots necessary for the implementation of a public-private partnership.
This opportunity should be taken advantage of, since the formation of a land plot, its state registration in the State Land Cadastre, which usually includes the need for preliminary development, coordination and approval of relevant land use documentation, if necessary, as well as the registration of title to it with the appropriate manager (public or local government authority), is a fairly lengthy process.
The country’s security and defense sectors can and should benefit from public-private partnerships. At the same time, such issues will definitely be relevant for a long time after the end of the war with the Russian Federation. The state should thoroughly rethink the legal framework for public-private partnership projects in this sector, as it is outdated and contradictory, and also ensure effective law-enforcement.
This should help to promote public-private partnership, as the official figures of the Ministry of Economy speak for themselves: as of 1 January 2025, 200 agreements were concluded in Ukraine under public-private partnership terms, of which only 22 are implemented (9 – concession agreements, 6 – joint venture agreements, and 7 – other agreements). 167 contracts remain unexecuted, terminated, or expired. In addition, 11 agreements were suspended because of the armed aggression of the Russian Federation.
Challenges and Prospects of РРРs in Defense
It is obvious that the reasons for the rareness of this type of cooperation with the state are legislative shortcomings. Preparing a partnership is a complex and lengthy process.
Our advice to future investors who are considering public-private partnerships as a form of cooperation with the government is to examine in detail at the project preparation stage what the advantages and disadvantages are of implementing public-private partnerships in the security and defense sectors, as well as the project implementation options.
As the security and defense sector is quite sensitive for the state and has its own regulatory features, it is also necessary to determine the list of entities whose consent will be required to start the project. Land and real estate issues, which arise in one way or another within the framework of almost every future public-private partnership project, should not be ignored.
