INVESTMENT DURING WARTIME: HOW LAW HELPS UKRAINE ATTRACT CAPITAL IN THE MOST CHALLENGING PERIOD OF ITS HISTORY

***Kostiantyn Kryvopust, Attorney-at-Law***

When Russian missiles began destroying Ukrainian cities in February 2022, many believed that investment activity in Ukraine would effectively come to a halt. At first glance, it seemed unlikely that any investor would risk committing capital to a country at war, where uncertainty had reached one of the highest levels in the world.

However, the experience of recent years has proven otherwise. Despite the ongoing war, Ukraine has not only maintained the interest of international businesses but has also gradually developed a unique legal framework for attracting investment under martial law. Moreover, for many investors, the Ukrainian market has become not only a challenge but also an opportunity.

War as a Legal and Economic Challenge

As an attorney advising businesses on investment projects, I regularly encounter questions that would have seemed extraordinary only a few years ago.

Can a manufacturing facility be built one hundred kilometers from the front line?

Can real estate located in a region exposed to missile attacks be insured?

How can investments be protected against war-related risks?

Does the state guarantee compensation if an enterprise is destroyed as a result of military action?

These questions have become part of the daily reality of doing business in Ukraine.

At the same time, the war has not abolished the fundamental principles of investment law. The Law of Ukraine “On Investment Activity,” the Law of Ukraine “On the Regime of Foreign Investment,” international bilateral investment treaties, and constitutional guarantees of property rights remain in force even under martial law.

For this reason, the state’s primary task is not only to ensure national defense but also to establish legal mechanisms that enable investors to operate in a high-risk environment.

The Wartime Paradox: Investment Has Not Disappeared

Contrary to common assumptions, investment activity in Ukraine has not ceased.

Since the beginning of the full-scale invasion, a considerable number of European companies have launched or expanded operations in Ukraine’s western regions. Strong interest has been observed in agriculture, logistics, information technology, renewable energy, and manufacturing.

A notable example is the construction of new production facilities in the Lviv, Volyn, and Zakarpattia regions. For many European investors, Ukraine has become an attractive alternative to Asian manufacturing markets due to its proximity to the European Union, skilled workforce, and long-term prospects for EU membership.

In other words, while the war has increased risks, it has not eliminated the economic rationale for investing in Ukraine.

How the State Seeks to Protect Investors

Every business values predictability. This is why one of the government’s key priorities has been the creation of instruments aimed at supporting and protecting investors.

Particular attention should be paid to the state support mechanism for significant investment projects, often referred to as the “investment nanny” program. It provides large investors with access to tax incentives, infrastructure support, and various forms of state assistance.

In addition, the government has significantly simplified procedures for establishing businesses, relocating enterprises, and obtaining certain permits and approvals.

Based on my professional experience, establishing a company in Ukraine today often requires less time than in many European Union member states. This is one of the positive outcomes of the country’s extensive digital transformation and deregulation efforts.

War Risks: The Main Obstacle to Investment

At the same time, the greatest challenge remains the issue of insuring war-related risks.

Consider the following example: a foreign company decides to build a grain storage facility in Ukraine with a total investment of €20 million. Under normal circumstances, such risks can be evaluated and insured through conventional mechanisms. During wartime, however, investors must also account for missile attacks, infrastructure damage, and even the temporary occupation of territories.

This is precisely why international war-risk insurance mechanisms have become critically important. Today, such instruments are increasingly being offered through international financial institutions, export credit agencies, and specialized investment guarantee programs.

In essence, these mechanisms create an additional layer of protection, allowing investors to make investment decisions even in the context of armed conflict.

The Reconstruction of Ukraine: Europe’s Largest Investment Project

In my view, many still underestimate the scale of Ukraine’s future reconstruction.

Once the war ends, the country will require the rebuilding of thousands of kilometers of roads, hundreds of bridges, energy facilities, residential buildings, schools, hospitals, and other critical infrastructure.

In many respects, the reconstruction of Ukraine may be compared to the post-World War II Marshall Plan, which contributed to the recovery of Western Europe. Ukraine is already laying the foundation for a similarly ambitious program of economic renewal.

For this reason, an increasing number of international companies view their presence in Ukraine not as a short-term business opportunity but as a strategic investment for decades to come.

Why the Rule of Law Matters Most

No amount of tax incentives can persuade investors to commit capital if they are not confident that their property rights will be protected.

This is why the rule of law, an effective judicial system, and predictable government policies remain the most important prerequisites for attracting investment.

International businesses need assurance that contracts will be enforced, property rights safeguarded, and disputes resolved through independent and reliable legal mechanisms.

In times of war, these issues become even more significant because investment risks increase dramatically.

Conclusion

Ukraine finds itself in a unique historical situation. On the one hand, the war has created unprecedented risks for business. On the other hand, it is during this difficult period that the foundations of the country’s future economy are being laid.

The legal framework governing investment under martial law is gradually evolving from a crisis-management model into a model designed to create new opportunities. The Ukrainian state, its international partners, and the private sector are jointly developing mechanisms that enable investment even under extraordinary circumstances.

As an attorney, I firmly believe that Ukraine’s greatest asset today is not only its natural resources or strategic geographic location. It is the resilience of its people, the state’s ability to reform itself during wartime, and the confidence in the country’s future.

These factors are already becoming the foundation for a new wave of investment that, following Ukraine’s victory and reconstruction, will shape the country’s economic landscape for decades to come.

Kostiantyn Kryvopust Attorney-at-Law