Ukraine Is Building a Legal Framework for Privately Financed Protected Defence Infrastructure

Complex law. Clear action.

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

Ukraine is not only trying to protect defence factories from missile and drone attacks. It is developing a legal model that could allow defence production to be separated from the financing — and, in some structures, the ownership — of the underlying industrial infrastructure.

That distinction matters.

On 23 September 2026, Ukraine’s Ministry of Defence announced that it is developing a mechanism to attract private capital, developers and investors into the construction of protected, including underground, defence production facilities.

The proposed changes would expand the framework created under Cabinet of Ministers Resolution No. 1494.

Resolution No. 1494 is already in force. Adopted on 19 November 2025 and currently in the version effective from 28 April 2026, it establishes an experimental framework for new construction, reconstruction and capital repair of production facilities of state enterprises and companies in Ukraine’s defence-industrial sector.

The newly announced proposal goes further.

According to the Ministry of Defence, the customer commissioning construction of a protected production facility could be not only a defence-industrial enterprise, but also another legal entity — including a developer or investor.

Such an entity could use its own or borrowed funds to construct the facility and subsequently transfer it to a defence company through ownership, lease or another form of use.

That seemingly technical change could have much wider consequences.

From a defence factory to an infrastructure investment

The traditional model is relatively straightforward:

defence manufacturer → finances factory → controls infrastructure → manufactures defence products

The emerging model could look different:

investor / developer → finances and builds protected facility → facility is transferred or leased to defence manufacturer → manufacturer operates production

This could allow the financing of the physical infrastructure to be separated from the defence company’s investment in machinery, technology, workforce and production capacity.

For Ukraine, that could support faster expansion of protected manufacturing.

For investors and lenders, however, the key question is different:

Can protected defence infrastructure become sufficiently predictable and financeable to attract private capital?

That is a more important question than construction simplification alone.

Construction law is only the first layer

A legal right to construct an underground facility does not automatically make the project investable.

Consider a future structure in which European capital is used to finance a protected production facility in Ukraine, potentially through a Ukrainian project company or developer.

A Ukrainian defence manufacturer operates from the facility under a long-term contractual arrangement.

Several years later, the manufacturer becomes insolvent, loses a major contract, changes ownership or stops operating.

What happens to the asset?

Can another defence manufacturer replace the original operator?

Can the facility be sold?

Can a bank enforce security over it?

Can it be transferred to another investor?

Can technical documentation be disclosed during financing, due diligence or a sale?

Can the facility be converted to another industrial use?

And what happens if the site contains security-sensitive infrastructure, controlled equipment or confidential technical information?

These questions determine whether an asset is merely legally constructible or actually financeable.

The transaction will require its own legal architecture

If the proposed mechanism is adopted, sophisticated projects are likely to require several legal layers to operate simultaneously.

1. Property and land rights

The transaction must clearly allocate rights relating to:

• the land;

• underground structures;

• connected surface infrastructure;

• utilities and access;

• production equipment installed by the manufacturer.

This becomes particularly important where the infrastructure owner and defence-production operator are different entities.

The legal treatment of underground structures, access rights and technologically connected above-ground infrastructure will therefore be central to transaction design.

2. Investment structure

Projects could potentially involve:

• a Ukrainian project vehicle;

• a developer;

• a private investor;

• a defence manufacturer;

• one or more lenders.

The allocation of ownership, control, financing obligations and operational responsibility should therefore be established before construction starts.

Depending on the final legal framework, the model may potentially support structures familiar from industrial real estate and project finance, such as:

build-to-suit development;
long-term industrial leasing;
SPV-based financing.

These are potential transaction models, however — not structures expressly created by the currently announced amendments.

3. Long-term use arrangements

A standard commercial lease may require substantial adaptation when the asset is a strategic defence-production facility.

Agreements may need to address:

• permitted activities;

• security requirements;

• alterations to the facility;

• maintenance and repair;

• continuity of operations;

• owner and lender access;

• termination;

• replacement of the operator;

• transfer of the facility.

The contractual architecture becomes particularly important if private capital is expected to remain invested for many years.

4. Security and sensitive information

Protected defence infrastructure is not ordinary industrial real estate.

Depending on the facility, its operator and the information concerned, data relating to location, protection systems, production configuration, capacity or logistics may be subject to national-security, confidentiality or classified-information restrictions.

That creates a structural issue for investors and lenders.

Conventional project financing normally requires extensive technical due diligence.

A protected defence-production project may simultaneously require strict limitations on who can access particular information.

The financing model must therefore reconcile two competing requirements:

sufficient transparency for investors and lenders;

and

sufficient information control for national-security purposes.

5. Financing and collateral

Private investment becomes much more difficult where lenders cannot determine what can be secured and what can be recovered following default.

Future transactions may therefore need clear answers on:

• mortgage and other security rights;

• enforcement;

• replacement of the defence operator;

• transfer restrictions;

• valuation;

• insurance;

• destruction and reconstruction;

• potential lender step-in mechanisms.

Importantly, these should currently be treated as issues requiring legal structuring, not as rights that the announced reform has already established.

This may ultimately become one of the most important elements of the framework.

6. Defence-sector eligibility

The simplified regime is designed for defence-industrial infrastructure.

That means the legal link between the facility and an eligible defence-industrial enterprise or activity is likely to remain important.

The final amendments will need to clarify how the status of the operator, the intended use of the facility and the participation of third-party developers or investors interact.

That matters because private capital requires predictability not only when entering the project but throughout its lifecycle.

7. Cross-border investment and compliance considerations

The Ministry’s announcement refers to developers, investors and private capital.

It does not yet establish whether a foreign legal entity could directly act as the construction customer, nor does it define the structure through which foreign-funded projects could participate.

That distinction should not be overlooked.

If the final framework permits foreign-funded structures, European investors may need to consider:

• corporate and ownership structure;

• UBO identification;

• sanctions screening;

• source-of-funds verification;

• anti-corruption controls;

• contractual compliance arrangements;

• applicable security restrictions.

Export-control analysis may also become necessary where a project involves controlled military or dual-use equipment, technology, software or technical information.

The need for such analysis would arise from the relevant controlled items or technology — not simply from the fact that the investment is foreign.

The insolvency problem may be the real test

The easiest transaction to regulate is a successful one.

The harder question is what happens when it fails.

Suppose a developer invests substantial capital in a highly specialised protected facility and the defence manufacturer subsequently becomes insolvent.

If the investor cannot replace the operator, transfer the asset, enforce security or obtain the approvals required to restructure the project, the facility could carry a substantial liquidity and valuation discount.

This creates a fundamental policy tension.

Ukraine must retain appropriate control over strategically sensitive infrastructure.

Private investors, however, need enforceable property rights and predictable restructuring and exit mechanisms.

The success of the proposed model may therefore depend on whether the final legal framework can satisfy both requirements.

Localisation could become easier

The proposal could also matter for European defence manufacturers considering production in Ukraine.

A company entering the Ukrainian market currently faces several simultaneous investment decisions:

• production technology;

• machinery;

• workforce;

• supply chain;

• physical protection;

• site selection;

• construction.

Separating the real-estate and infrastructure component could reduce that burden.

Instead of:

European manufacturer → secures site → builds protected factory → equips it → operates it

a future structure could potentially be:

developer / project vehicle → builds and finances protected industrial facility

↓

Ukrainian or European-linked defence manufacturer → operates under a long-term arrangement

For European manufacturers, that structure would resemble familiar industrial real-estate arrangements more closely than direct investment into an entire production site.

It could therefore support not only expansion of Ukrainian defence production, but also broader EU–Ukraine defence-industrial localisation.

However, the precise ability of foreign manufacturers or investors to participate will depend on the final wording of the amendments and other applicable Ukrainian law.

A new market segment may be forming

The Ministry of Defence itself describes the initiative as creating a separate segment of protected industrial infrastructure in which defence enterprises, construction companies, developers and private investors could participate.

It also reports that consultations with representatives of the construction sector have shown business interest in the model.

That is significant.

A functioning market would potentially involve much more than builders.

It could require:

• industrial developers;

• infrastructure investors;

• banks;

• insurers;

• engineering companies;

• defence manufacturers;

• security specialists;

• project managers;

• legal and regulatory advisers.

The transaction architecture may therefore become almost as important as the physical infrastructure itself.

But the law has not changed yet

This distinction is critical.

Cabinet Resolution No. 1494 is already in force. The official database records it as effective, with the current version dated 28 April 2026.

The broader mechanism announced by the Ministry of Defence is proposed, not yet adopted.

According to the Ministry, the draft amendments have passed the principal stage of inter-agency review and are currently being refined following legal and anti-corruption examination before being submitted to the Cabinet of Ministers.

Investors should therefore not structure transactions on the assumption that the announced model is already legally available.

But potential participants do not necessarily need to wait before analysing it.

This is exactly the stage at which developers, defence manufacturers and investors can begin identifying the legal conditions they would require before committing capital.

The implementing details will matter

The Ministry’s announcement establishes a clear policy direction, but not yet a complete transaction framework.

Several important questions remain dependent on the final wording of the amendments, including:

• eligibility of non-defence entities;

• requirements applicable to developers and investors;

• treatment of foreign-funded structures;

• property and land arrangements;

• transfer restrictions;

• security requirements;

• interaction with other defence-sector rules.

These details will determine whether the reform creates only a faster construction procedure or something more commercially significant.

Seven questions investors should ask now

Before committing capital to a future protected defence-infrastructure project, an investor should be able to answer at least seven questions:

1. Who owns the facility?

2. What legal rights exist over the land and underground structures?

3. What happens if the defence operator defaults or becomes insolvent?

4. Can another manufacturer replace it?

5. What rights can lenders obtain over the asset?

6. What information may investors, banks and potential purchasers lawfully access?

7. How can the investor restructure or exit the project without compromising Ukrainian security requirements?

The answers will determine whether Ukraine is merely simplifying the construction of protected defence factories — or creating something more significant:

a viable private market for protected defence-industrial infrastructure.

The real test is therefore not simply whether Ukraine can make underground construction faster.

It is whether the final framework can make protected defence infrastructure sufficiently secure for the state and sufficiently predictable for private capital.

For European defence companies, developers and investors, that distinction could be commercially important.

For Ukraine, getting the legal architecture right could unlock something the defence industry urgently needs:

additional protected production capacity without requiring manufacturers themselves to finance every square metre of the infrastructure in which they operate.

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.

Sources

Ukraine Ministry of Defence, Private capital to be involved in development of the “underground defence industry”: Ministry of Defence creates mechanism, 23 September 2026:
https://mod.gov.ua/news/do-rozbudovy-pidzemnoho-opk-zaluchat-pryvatnyi-kapital-minoborony-stvoriuie-mekhanizm

Cabinet of Ministers of Ukraine Resolution No. 1494 of 19 November 2025, current version from 28 April 2026:
https://zakon.rada.gov.ua/laws/show/1494-2025-%D0%BF#Text

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