Ukraine Reconstruction, Contract Law
Netherlands’ €1.2 Billion Ukraine Recovery Package — Part 2: Structuring Contracts and Managing Risk
Funding is only the beginning. For Dutch companies entering Ukraine’s reconstruction market, the real challenge is allocating legal and financial risks before signing. Part 2 examines investment protection, export credit insurance, back-to-back contracts, payment security, war-risk clauses and intermediary due diligence.
Netherlands’ €1.2 Billion Ukraine Recovery Package. Part 2: How to Turn Legal Risks into Contractual Protections
Complex law. Clear action.
Reviewed by Oleksandr Sobovyi, Founder & CEO of CORVUS AI. Editorial responsibility statement below.
Part 1 addressed where the risks lie. Part 2 addresses who bears them under the relevant documents. These are different questions. A compliance assessment helps determine whether a company can enter a project. The commercial value of the transaction, however, depends on three decisions made before the first contract is signed: where the asset is held, in what sequence the documents are negotiated and concluded, and how obligations owed to the buyer are allocated throughout the supply chain. In IFI-financed and public procurement projects, a Dutch company will often have limited scope to amend standard contractual documents. Its negotiating room may lie in the particular conditions of contract, subcontracts, consortium agreements and its own corporate structure. That is where legal structuring matters.
1. Structure: investment protection begins with where the asset is held
The bilateral agreement between the Netherlands and Ukraine on the promotion and reciprocal protection of investments was signed on 14 July 1994 and entered into force on 1 June 1997.
For a qualifying Dutch investor, this treaty remains an important starting point for international investment protection.
The Netherlands withdrew from the Energy Charter Treaty (ECT), with its withdrawal taking effect on 28 June 2025.
Article 47(3) of the ECT provides for a 20-year continuation of certain protections for investments made before withdrawal took effect. New Dutch investments made in Ukraine in 2026 or 2027 should not assume that the ECT's investment-protection provisions apply, including Article 12(2), which addresses certain losses resulting from war or armed conflict.
The continuing operation of sunset provisions and the relationship between investment arbitration and EU law may raise additional legal questions in particular cases.
What does the bilateral treaty provide?
Article 6 addresses deprivation of investments and compensation, including the valuation and transfer of compensation. Article 7 establishes relative standards of treatment concerning losses arising from war, armed conflict and other specified events.
The distinction is important.
The treaty may provide protection against qualifying state conduct, including unlawful expropriation or discriminatory treatment. It does not operate as a general insurance policy against physical destruction caused by war.
War-related physical and political risks must therefore be assessed separately, including the availability and scope of insurance or investment guarantees.
Three practical consequences follow.
A supplier is not necessarily an investor.
A one-off sale of equipment will generally not, by itself, qualify as a protected investment. However, treaty definitions may extend to shares, certain contractual rights, property interests and other qualifying assets.
Establishing a subsidiary, joint venture or project company may create an investment structure, but incorporation alone does not establish treaty protection.
A supplier must first determine whether its activity qualifies as an investment under the applicable treaty. Otherwise, its primary protection will ordinarily arise from its contract, payment security and insurance.
The structure must be established before a dispute becomes foreseeable.
Restructuring an investment to obtain treaty protection after a dispute has become foreseeable may give rise to objections based on abuse of process.
Where a Dutch holding structure is commercially justified, it should be considered before the investment is made, with genuine business substance and a defensible investment rationale.
It should not be created solely on the assumption that a Dutch corporate vehicle automatically guarantees access to investment arbitration.
The structure must work under tax and currency rules as well.
A Dutch holding company above a Ukrainian limited liability company raises questions of investment protection, corporate governance, tax treaty treatment and foreign exchange regulation.
Addressing these separately may produce a structure that is efficient for one purpose but ineffective for the others.
The legal, tax and currency consequences should be assessed together before implementation.
2. Sequence: the insurer and financing institution shape the contract
A common mistake is to agree commercial terms with a Ukrainian buyer, sign the contract and only then approach the insurer.
Atradius Dutch State Business assesses not only the buyer but also the proposed transaction, including payment security, contractual terms, environmental and social risks and relevant compliance requirements.
If a signed contract does not meet the insurer's conditions, the parties may have to renegotiate it or proceed without the intended coverage.
Under the Ukraine export credit insurance facility, the maximum cover for eligible political and commercial risks has been increased to 98%, subject to the applicable policy conditions.
This makes the timing of insurance discussions commercially significant.
A more reliable sequence is:
Conduct a preliminary assessment of the buyer, transaction and available insurance instrument.
Engage Atradius DSB and discuss the proposed insurable structure.
Negotiate the term sheet and draft commercial contract in parallel with the insurance assessment.
Agree any necessary conditions precedent, including insurance approval where appropriate.
Sign and implement the transaction in accordance with the agreed conditions.
The same principle applies where payment is financed by an international financial institution.
Its procurement rules and applicable standard contract conditions determine which provisions may be negotiated and which must remain unchanged.
3. Risk allocation throughout the supply chain: mirror the exposure, not necessarily the wording
A Dutch supplier may find itself between two contractual layers: a Ukrainian buyer or an IFI-financed contracting authority above it, and component manufacturers, often outside the EU, below it.
Obligations accepted under the main contract must be reflected appropriately in the downstream contractual structure.
Otherwise, the supplier may remain liable to the buyer for a failure caused by a subcontractor without having an effective corresponding remedy.
The objective is not literal duplication of every clause. It is alignment of the relevant obligations, evidence requirements, deadlines and remedies.
The minimum back-to-back matrix should cover the following.
Origin of goods.
The manufacturer should provide contractual representations and supporting evidence concerning the origin of the goods, including relevant production records and information on substantial transformation where required.
As explained in Part 1, Ukrainian localisation requirements and Ukraine Facility eligibility rules may involve different legal tests. Supplier nationality is not a substitute for establishing the origin of the goods.
Recovery of ineligible expenditure.
Where expenditure becomes ineligible because of a subcontractor's breach, the supplier should have an appropriately defined contractual recovery mechanism.
The clause must address causation, evidence, applicable liability limits and the period during which claims may be brought.
That period should be aligned, where appropriate, with audit and record-retention obligations.
Audit access.
Where the main contract or applicable IFI procurement documents require access to relevant subcontractor records, corresponding obligations should be included in the subcontract.
Audit rights do not automatically extend to every subcontractor in every IFI-financed project. Their scope depends on the applicable documents and contractual arrangements.
Sanctions representations.
Contracts should contain proportionate sanctions representations, notification obligations and appropriate rights to suspend or terminate where continued performance would breach applicable law or agreed compliance requirements.
Change in law.
Ukraine's localisation requirements are scheduled to increase by five percentage points annually, reaching 40% in 2028 for relevant procurement categories, subject to applicable exceptions and subsequent legal developments.
The eligibility framework under the Ukraine Facility may also change. In particular, certain reciprocal-access arrangements involving the United States, Canada, the United Kingdom and Japan have been established for a defined period ending on 23 July 2027.
A multi-year supply agreement should therefore include a mechanism addressing relevant changes in law, eligibility and compliance costs.
Without such a mechanism, the supplier may remain committed to a fixed price while the legal conditions of performance change.
Ukrainian Government: localisation requirements
Liability caps and exclusions.
The buyer may seek exceptions to the supplier's liability cap.
A defensible negotiating position is to limit uncapped liability to narrowly defined categories, such as fraud and wilful misconduct, where legally and commercially appropriate.
Recovery of ineligible expenditure should be addressed through a separately defined mechanism, with a proportionate liability cap and claim period rather than an unrestricted indemnity.
The final allocation must remain consistent with mandatory law and any non-negotiable requirements imposed by the funder or contracting authority.
Additional protections.
The supplier should also assess:
gaps between its upstream liability and amounts realistically recoverable from subcontractors;
alignment of notification deadlines, limitation periods and document-retention obligations;
step-in and replacement rights for critical subcontractors;
performance guarantees, retention arrangements or other appropriate security.
The purpose of back-to-back drafting is to ensure that the supplier can actually enforce the protections on which its commercial model depends.
4. Payments: planning for restricted cash flows
Ukraine's wartime foreign exchange regime is governed principally by Resolution No. 18 of the National Bank of Ukraine, dated 24 February 2022.
The applicable restrictions depend on the nature of the transaction.
Import payments, external debt servicing, investment-related transfers and dividend repatriation are subject to different rules and conditions.
During 2025–2026, the NBU introduced successive measures to ease certain restrictions, including investment-related and loan-related mechanisms.
The direction has been towards gradual liberalisation. However, a project's financial viability should not depend on an assumption that the remaining restrictions will disappear.
For suppliers, three practical points follow.
Payment currency and source of funds.
Where commercially feasible, the contract should establish a euro-denominated payment obligation and identify a reliable source of funds.
The legal ability of the buyer to make the payment must be assessed under the applicable financing arrangements and Ukrainian foreign exchange rules.
Payment security.
Depending on the transaction, the parties may consider direct payment arrangements, escrow, advance payments, bank guarantees or a confirmed documentary letter of credit.
A direct payment from an international financing institution to a supplier is not automatically available. It must be permitted by the financing agreement and relevant disbursement procedures.
Likewise, a confirmed letter of credit requires an acceptable issuing bank, confirmation arrangements and compliance with applicable currency restrictions.
Dividend repatriation and retained profits.
An investor establishing a Ukrainian subsidiary should model a scenario in which profits remain in Ukraine for an extended period.
Dividend transfers and other capital-related payments may remain subject to restrictions, quantitative limits or additional conditions.
If the investment cannot function under a conservative cash-flow scenario, the financial structure should be reconsidered before entry.
5. War is foreseeable. Its contractual consequences must still be allocated
Russia's full-scale invasion of Ukraine began in February 2022.
For a contract signed in 2026, the existence of war is a known circumstance. That does not mean that force majeure is automatically unavailable.
The legal assessment depends on the specific event, its effect on performance, the governing law and the contractual allocation of risk.
A foreseeable general risk may still produce a specific event whose consequences could not reasonably be prevented or overcome.
A general force majeure clause should therefore be supplemented, where appropriate, by a dedicated war-risk provision.
Relevant events may include:
attacks on project sites or logistics infrastructure;
prolonged electricity outages;
curfews or restrictions on access to particular territories;
disruption of transport routes;
mobilisation of essential subcontractor personnel.
For each category, the contract should address whether the consequence is an extension of time, an adjustment of costs, suspension or termination.
It should also specify notice requirements, evidence, mitigation obligations and the period after which either party may terminate.
Force majeure and hardship should be distinguished. An impediment preventing performance is not necessarily the same as a substantial change in the economic balance of the contract.
The operational question must also be addressed: can the Ukrainian partner maintain access to essential personnel, including through any legally available reservation arrangements for critical employees?
Without a realistic staffing and contingency plan, the project schedule may rest on assumptions that cannot be delivered.
Dispute resolution.
Internationally financed contracts may contain standard dispute-resolution provisions, but the forum depends on the applicable contractual documents.
Where the buyer is a Ukrainian public enterprise outside an IFI-financed arrangement, the supplier should assess whether international arbitration is legally permissible and commercially appropriate.
A seat outside Ukraine may be desirable in some transactions, but it is not always available or necessary.
Ukraine is a party to the New York Convention, which provides a framework for the recognition and enforcement of foreign arbitral awards.
The Convention does not guarantee actual recovery.
Before agreeing to arbitration, the supplier should consider arbitrability, the authority of the public-sector counterparty to agree to arbitration, enforcement risks and the location of assets against which an award could realistically be enforced.
6. Intermediaries: one of the most underestimated sources of liability
Ukraine's reconstruction market has attracted intermediaries offering access to contracting authorities and donor-funded programmes.
Success-based remuneration linked to the award of a public contract is a significant compliance risk indicator, particularly where public officials or procurement decisions are involved.
It is not, by itself, proof of corruption or automatically unlawful.
However, such arrangements may require enhanced due diligence under Dutch and Ukrainian anti-bribery law and the integrity rules of international financial institutions.
Tender documents may also require disclosure of commissions and remuneration paid to agents or intermediaries.
Our minimum recommended safeguards are:
due diligence before appointing the intermediary, including beneficial ownership, sanctions and politically exposed person checks;
a written mandate describing genuine and verifiable services;
remuneration proportionate to the services provided;
transparent payment arrangements and restrictions on unauthorised payments to third parties;
audit, record-keeping and termination rights;
disclosure of agent commissions where required by the applicable procurement rules.
If an intermediary refuses reasonable transparency and compliance safeguards, the commercial relationship should be reconsidered.
Limitations of this analysis
Our analysis of the Netherlands–Ukraine bilateral investment treaty focuses on Articles 6 and 7 and does not replace a project-specific assessment of investor nationality, the definition of investment, applicable treaty protections and dispute-resolution mechanisms.
We do not suggest that a supply contract can never qualify as an investment. That question depends on the relevant treaty, contractual rights and factual circumstances.
The Ukrainian foreign exchange framework is described as of 29 October 2026. Resolution No. 18 has been amended repeatedly, and the applicable conditions must be checked against its current consolidated text on the transaction date.
Standard contractual conditions differ between international financial institutions and between versions of their procurement documents.
Our recommendations concerning arbitration, payment security and risk allocation describe issues for legal structuring and negotiation, not mandatory terms applicable to every contract.
What to do before signing the first contract
Choose the operating model. Determine whether the company will only supply goods or establish a business presence in Ukraine. If an investment structure is justified, assess treaty protection, corporate substance, taxation and currency regulation together before making the investment.
Engage Atradius DSB early. Discuss the proposed transaction before finalising the term sheet and consider insurance approval as a condition precedent where appropriate.
Prepare a back-to-back risk matrix. Map each material obligation owed to the buyer against the corresponding subcontractor obligation, remedy, evidence requirement and liability exposure.
Design the payment structure. Assess euro-denominated payments, permitted direct-payment mechanisms, letters of credit or other security. Model a scenario involving restricted dividend repatriation and retained profits.
Draft a dedicated war-risk clause. Address specific events, notice requirements, mitigation, extensions of time, cost consequences, suspension and termination, alongside force majeure and hardship.
Screen every intermediary. Complete due diligence and agree enforceable compliance safeguards before appointing an agent or consultant.
A full legal structuring exercise, rather than a limited contract review, is particularly appropriate where a company establishes a presence in Ukraine, enters a long-term contract with a Ukrainian public-sector customer or makes an investment in energy infrastructure.
Disclaimer
This article has been prepared by CORVUS AI for general informational and educational purposes only. It is intended to make complex legal and regulatory developments easier to understand.
It does not constitute legal advice and does not create a professional adviser–client relationship. The information should not be relied upon as a substitute for advice based on the specific facts, circumstances and applicable law relevant to your organisation or project.
The article reflects our understanding of the law and regulatory framework as of the date of publication. Legislation, case law, regulatory guidance and administrative practice may subsequently change. While reasonable care has been taken in preparing this article, CORVUS AI does not warrant that the information is complete or remains current after the date of publication. We do not undertake to update this content.
To the fullest extent permitted by applicable law, CORVUS AI excludes liability for loss arising from reliance on this article. Nothing in this article constitutes an offer or solicitation to provide regulated legal services in any jurisdiction where doing so would be unlawful.
AI-assisted preparation: This article was prepared with the assistance of AI tools. Its legal analysis, conclusions and final text were subject to human review and editorial control and were reviewed and approved prior to publication by Oleksandr Sobovyi, Founder & CEO of CORVUS AI. CORVUS AI retains editorial responsibility for the published content.
For advice tailored to your organisation, project or specific circumstances, please contact CORVUS AI.
Oleksandr Sobovyi
Founder & CEO, CORVUS AI
More than 20 years of legal and public-sector experience, including senior legal positions in Ukraine's Ministry of Defence, Ministry of Justice and Ministry of Agrarian Policy.
CORVUS AI · Netherlands
contact@corvusai.eu
https://corvusai.eu
This article reflects the firm's analysis as of 29 October 2026 and does not constitute legal advice concerning a specific transaction or investment.
Editorial responsibility statement. This article was prepared with the assistance of artificial intelligence tools and subjected to human legal and editorial review. CORVUS AI assumes editorial responsibility for the publication. The editorial process takes account of the transparency framework in Article 50(4) of Regulation (EU) 2024/1689 (AI Act), including the provisions concerning human review and editorial control.
