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Ukraine Facility

Ukraine Facility: The New Country Eligibility Risk

The Ukraine Facility has expanded its list of eligible countries. But broader access creates a new procurement risk: country eligibility, product origin and reciprocal access must now be managed throughout contract performance — not treated as a one-time tender check.

Complex law. Clear action.

Reviewed by Oleksandr Sobovyi, Founder & CEO of CORVUS AI — editorial responsibility statement below.

The Ministry of Economy’s clarification of 28 August 2026 is being read as good news for contracting authorities. That is a mistake. The broader the list of eligible countries becomes, the weaker the position of a contracting authority that procures equipment outside that list and expects to justify the decision by the absence of alternatives.

On 28 August 2026, the Ministry of Economy published document No. 3323-04/90628-06, “On Expanding the List of Eligible Countries for Procurement under the Ukraine Facility”. A separate clarification on country eligibility appeared eleven days after the letter of 17 August 2026, No. 3323-04/76414-06, concerning the entry into force and phased implementation of the Law of Ukraine “On Public Procurement” of 27 May 2026, No. 4888-IX. The timing is not accidental: the Ministry is confirming that, while the procedural framework is changing, the substantive requirement concerning country eligibility remains in place and is not shifted elsewhere.

What Exactly Is Regulated — and Who Is Covered

The framework operates on two levels, and both must be considered together.

The first level is EU law. Article 11 of Regulation (EU) 2024/792 (“Rules on the eligibility of persons and entities, on the origin of supply and materials and on restrictions under the Facility”) establishes two separate tests.

The entity test is contained in Article 11(1). Participation in procurement procedures and procedures for the award of grants and prizes is open to international and regional organisations, as well as to natural persons who are nationals of, and legal persons effectively established in: under point (a), Member States, Ukraine, Western Balkan partners, Georgia, Moldova and contracting parties to the Agreement on the European Economic Area; and, under point (b), countries providing Ukraine with a level of support comparable to that provided by the Union, taking into account the size of their economy, and for which reciprocal access has been established by the Commission.

For countries falling under Article 11(1)(b), reciprocal access is established by the Commission through implementing acts pursuant to Article 11(2), following consultation with Ukraine and in accordance with the examination procedure. The provision expressly states that such access may be granted for a limited period of at least one year.

The product test is contained in Article 11(3). All supplies and materials financed and procured under the Facility must originate from the countries referred to in points (a) and (b), unless those supplies and materials cannot be sourced from those countries under reasonable conditions.

The second level is Ukrainian law. Article 5 of the Framework Agreement between Ukraine and the EU transfers these requirements to contracting authorities, while Cabinet of Ministers Resolution No. 1254 of 25 September 2025, effective from 4 October 2025, supplemented the Specific Rules for Public Procurement established by Resolution No. 1178 with a separate section covering: registration of the participant in an eligible country; absence of EU sanctions against the participant and its beneficial owners; origin of goods, including goods incorporated into works and services; and eligibility of subcontractors. Non-compliance constitutes grounds for rejection of a tender, while at the payment stage it constitutes grounds for refusal if the supplier has failed to provide a document confirming the country of origin of each product or if that country is not included in the eligible-country list.

The current list published by the Ministry of Economy includes the 27 EU Member States, EEA countries (Iceland, Liechtenstein and Norway), the Western Balkans (Albania, Bosnia and Herzegovina, North Macedonia, Montenegro, Serbia and Kosovo), Ukraine, Georgia and Moldova, as well as the United States, Canada, the United Kingdom and Japan. The last four fall within Article 11(1)(b), and their inclusion is based not on a decision of the Ministry but on Commission implementing decisions adopted in June 2026: (EU) 2026/1441 for the United States, 2026/1442 for Canada, 2026/1445 for the United Kingdom and 2026/1449 for Japan.

Three Issues the List Does Not Resolve

First. Eligibility under Article 11(1)(b) is temporary by design.

Member States, EEA countries, the Western Balkans, Georgia, Moldova and Ukraine are eligible by virtue of the Regulation itself. The United States, Canada, the United Kingdom and Japan are eligible by virtue of Commission decisions, each formulated in the same terms: reciprocal access is granted “for a period of one year from 23 July 2026”. In other words, until 23 July 2027.

This is neither a technical detail nor an accident. Article 11(2) expressly provides for temporariness as a standard feature of this category. Extension is not automatic: it requires a new Commission implementing act adopted through the comitology procedure. Moreover, Article 42(3) of the Regulation establishes a specific rule for implementing acts under Article 11(2): where the committee delivers no opinion, the Commission shall not adopt the draft implementing act. No equivalent limitation applies to the other implementing acts under the Regulation. The legislature deliberately made continuation of reciprocal access capable of being blocked.

This leads to the central practical question. A construction contract with an 18–24 month performance period, concluded in autumn 2026 and incorporating US or Japanese equipment in its specification, will reach the expiry of the legal basis for eligibility while performance is still ongoing.

CORVUS AI’s position is that neither Article 11 nor the four implementing decisions contain an express grandfathering rule for contracts concluded while reciprocal access was in force. We do not argue that a product automatically becomes ineligible after 23 July 2027 — the legislation contains no such rule either. We argue that the issue is unresolved, and an unresolved issue in a legal relationship where one party has the power to impose a financial correction represents risk, not a neutral condition.

Second. The Ministry of Economy’s list is not an independent legal basis.

An important qualification is necessary: Resolution No. 1178 expressly operates with the concept of the list, so within the domestic legal framework it is not legally irrelevant. However, the international eligibility of a country arises from the Commission implementing decision, not from publication on the Ministry’s website. A statement that “the country was on the list when the procurement procedure was announced” will not necessarily resolve the issue in a Commission audit if the underlying decision has meanwhile expired but the list has not been updated. The reverse situation is also possible: a decision may have been adopted while publication of the updated list is delayed.

The practical conclusion is simple: the list should not merely be consulted; its status should be documented. A PDF snapshot of the relevant Ministry of Economy webpage and the details of the corresponding Commission decision should form part of the procurement file both on the date the procedure is announced and on the date of each payment. Ukraine Facility procurement documentation must be retained for five years, and it will be reviewed by reference to the legal position on the relevant date, not the date on which the audit takes place.

Third. The Regulation does not define what “originate from” means.

Neither Article 11(3), Article 5 of the Framework Agreement nor the relevant section of the Specific Rules defines the origin of a product. A contracting authority obtains a certificate from a chamber of commerce and assumes that the issue is closed.

CORVUS AI’s position is that the most defensible EU-law benchmark for determining origin is the non-preferential origin criterion under Article 60 of the Union Customs Code (Regulation (EU) No. 952/2013): goods are either wholly obtained in a single country or undergo their last substantial, economically justified processing or working in an undertaking equipped for that purpose, resulting in the manufacture of a new product or representing an important stage of manufacture. Article 59 UCC also supports this reading by extending Articles 60–61 beyond tariff purposes to other Union measures relating to the origin of goods.

There is no express cross-reference from Regulation 2024/792 to the Union Customs Code, and we therefore identify this as an interpretative position rather than black-letter law. But the risk is asymmetrically distributed: if an auditor applies the UCC test while the contracting authority relied on a “country stated in the certificate” test, the expenditure may be found ineligible — not the other way around. Assembly of Chinese-manufactured components at a facility in an eligible country does not, by itself, satisfy this test.

The evidentiary value of the document should also be considered separately. A certificate of origin constitutes evidence of origin, but it does not create an absolute legal presumption and does not preclude subsequent examination of the underlying manufacturing facts: Article 61 UCC expressly allows additional evidence to be requested where reasonable doubts exist. A contracting authority that possesses only a certificate but has no understanding of the manufacturing chain is less protected than it may assume.

Where Client Expectations and Enforcement Diverge

Contracting authorities tend to perceive eligibility as a qualification requirement: verify it when evaluating tenders and the issue is closed.

The Ukrainian implementation framework says otherwise. Origin documents must be provided with each delivery note, acceptance certificate and invoice, and failure to provide them — or the identification of an ineligible country of origin — constitutes an independent basis for refusing payment. We do not claim that eligibility under EU law is definitively assessed on the date of each payment; the Regulation contains no such rule. Our practical conclusion is narrower: it is dangerous for a contracting authority to assume that origin risk is definitively closed on the date of the tender award.

The second misconception concerns the exception in Article 11(3). Clients read the phrase “unless those supplies and materials cannot be sourced under reasonable conditions” as authorising the contracting authority to resolve the issue independently. Article 11(3) does not confer such unconditional discretion. At the same time, the Regulation does not establish a detailed procedure for demonstrating that sourcing under reasonable conditions is impossible: the only expressly stated obligation of the Commission is to include information concerning the application of this paragraph in the annual report under Article 39(4). The conclusion is that relying on the exception without a documented position from the competent authorities creates significant audit risk.

Separately, Article 11(8) provides a distinct derogation mechanism, primarily allowing entities from otherwise non-eligible countries to participate in duly justified cases, including urgency, unavailability of services on the relevant markets, or other duly justified circumstances where application of the eligibility rules would make the realisation of an activity impossible or excessively difficult. It should not be conflated with the origin exception for supplies and materials under Article 11(3). Such a derogation should not be treated as applying “by default”: the justification should exist in written form as part of a contemporaneous audit trail rather than being reconstructed after an auditor raises the issue.

The third misconception concerns financial consequences, which are often reduced to the statement that “the Commission will reduce the next tranche”. There are several mechanisms. Article 26(7), where cases or serious concerns of irregularities, fraud, corruption or conflicts of interest have been identified and not corrected by Ukraine, or where there has been a serious breach of an obligation arising from agreements under Articles 9, 10 and 22, allows the Commission to reduce non-repayable financial support, recover amounts due to the Union budget, including through offsetting, reduce the amount of the loan to be disbursed, or require early repayment. Article 35(4) provides for proportionate reduction and recovery on the same grounds, expressly referring to the principle of proportionality and Ukraine’s right to submit observations. The consequence may therefore take the form of a correction, recovery or offsetting — while the manner in which that consequence is passed on to a particular contracting authority or supplier is determined by the national legal and contractual framework. This is precisely why contractual allocation of risk matters more here than internal control alone.

This closes the circle of the argument. Before the United States, Canada, the United Kingdom and Japan were added to the list, the argument that “comparable equipment does not exist in eligible countries” carried weight for entire categories of goods. Since 23 July 2026, the scope for such an argument has narrowed substantially. Expansion of the list is not an expansion of a procurement officer’s freedom; it is a contraction of the space for good-faith justification. The current list still does not include China, Türkiye, Switzerland or South Korea — precisely the countries from which many of the components giving rise to disputes originate.

Limitations of Our Position

We do not claim that Commission audits will necessarily apply the UCC non-preferential origin test. A less restrictive approach is possible, under which certificates of origin are regarded as sufficient evidence where the contracting authority has acted in good faith. The divergence between the wording of the Regulation and its future practical application is real and has not yet been resolved either by Commission practice or by the national regulator. Our recommendations are based on the stricter scenario because the cost of error is not distributed in favour of the contracting authority.

A second limitation is that movement can occur in both directions. Article 11(7) allows eligibility and origin rules to be restricted on the basis of nationality, geographical location or the nature of legal persons where required by the specific nature of the activity or where the procedure affects security or public order — in particular strategic assets and interests of the Union, Member States or Ukraine, including the integrity of digital infrastructure, communication and information systems and related supply chains. For projects in energy, transport, communications and demining, this means that the list of eligible countries is a ceiling, not a guarantee: a particular procedure may be narrowed further. Clients operating at the intersection of reconstruction and defence infrastructure should read this provision before consulting the list.

What a Competent GC Should Do This Week

  1. Extract the register of active Ukraine Facility-funded contracts with performance extending beyond 23 July 2027 and identify those whose specifications contain goods originating in the United States, Canada, the United Kingdom or Japan. This is the first-priority list.

  2. For each such contract, check whether it contains a regulatory eligibility clause. The clause should not be tied solely to non-renewal of a particular Commission decision. It should be triggered by any loss of eligibility for Union financing: expiry, amendment, suspension or withdrawal of reciprocal access; changes to country-eligibility rules; subsequent determination of ineligible origin; or inability of the supplier to provide sufficient documentary evidence. Consequences should include replacement with eligible products without an increase in price, suspension of payment, or termination without penalties for the contracting authority.

  3. Introduce a documentation rule: retain a snapshot of the Ministry of Economy’s list and the details of the relevant Commission decision both on the date the procurement procedure is announced and on the date of each payment.

  4. Supplement the contractual framework with an obligation on the supplier to reimburse the contracting authority for amounts found to constitute ineligible expenditure following an audit by the Commission, the Audit Board or the State Audit Service, with the duration of that obligation aligned with the five-year documentation-retention period.

  5. For works contracts, separately review goods incorporated into the works. This is the category in which breaches most frequently arise and are detected the latest.

  6. Where reliance on Article 11(3) or Article 11(8) is foreseeable before the procurement procedure is announced, the justification should be prepared and documented before publication of the procedure. Where the relevant circumstances arise later, they should be documented contemporaneously, at the time they arise, rather than reconstructed retrospectively after an auditor requests an explanation.

The threshold at which a legal opinion is required rather than an internal review is any procurement in which goods originating from Article 11(1)(b) countries represent a material share of the contract value, or where the supply chain involves assembly or processing in an eligible country using components manufactured outside eligible countries. In the latter case, the issue cannot be resolved by a certificate alone; it requires analysis of the manufacturing process.

Oleksandr Sobovyi
Founder, CORVUS AI. PhD in International Law, Honoured Lawyer of Ukraine. Former Director of the Legal Department of the Ministry of Defence of Ukraine and Director of Department of the Ministry of Justice of Ukraine.

CORVUS AI, Rotterdam, the Netherlands — contact@corvusai.eu

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.

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Ukraine Facility: The New Country Eligibility Risk

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