How to Structure a Defence Joint Venture with a Ukrainian Manufacturer: A 7-Step Legal Guide (2026 Update)

By late 2026, the integration of Ukraine’s defence industry with European partners has accelerated significantly. With the EU-Ukraine Strategic Defence Industrial Partnership now channeling up to €1 billion in loan-backed funding into joint production, the incentive to formalize JVs has never been higher. However, Western boards must navigate a complex regulatory environment. Done in the wrong order, a promising JV stalls for months—or triggers an export-control violation before the first prototype ships.

Step 1. Sanctions compliance and KYC — both ways

Ukrainian law requires confirmation that the foreign partner, its owners and beneficiaries are not sanctioned or linked to the aggressor state. Western partners should mirror this with their own ownership due diligence: 2026 enforcement trends, including the BIS Affiliates Rule and the persistent OFAC 50% rule, make ownership screening a board-level issue on both sides.

Step 2. Export-control assessment of the product

Before any interaction, classify the technical data, documentation and software against Ukraine's export-control regime—specifically the Law on State Control over International Transfers of Goods of Military Purpose and Dual Use. Note that as of July 2026, a special mechanism exists for 'Drone Deals' that may simplify exports for codified technologies, though SSECU oversight remains mandatory for all military-grade transfers.

Step 3. SSECU pre-approval — before the first drawing crosses the border

Sharing drawings, source code or technical consultations with foreign nationals legally equals a technology export. Until the State Service for Export Control of Ukraine (SSECU) issues its approval or conclusion, transferring technical materials is prohibited. This remains the single most common—and most expensive—mistake in Ukrainian defence JVs.

Step 4. Choose the partnership model

• Foreign partner acquires equity in the existing Ukrainian LLC.
• A new joint legal entity in Ukraine or in the partner's jurisdiction.
• Investment, venture or licensing agreement without a shared entity.

Step 5. The corporate agreement: IP, deadlocks, exit

Ukrainian companies are acutely concerned about IP leakage; Western partners worry about governance and audit capacity. A robust corporate agreement must cover governance, financing, IP ownership, and deadlock resolution. With the new EU-Ukraine Defence Industrial Pact drafting underway, ensure your IP clauses align with potential EU-funded project requirements.

Step 6. Antitrust clearance

Where Ukrainian state-owned enterprises participate, forming a new entity qualifies as a concentration requiring clearance from Ukraine's AMCU and the partner countries' competition authorities. Recent precedents show that early engagement with regulators is essential for projects involving dual-use technologies.

Step 7. Capture the incentives and EU funding

• Defence City residency: profit-tax exemption on reinvested earnings for companies with 75%+ qualified defence revenue.
• Brave1 platform: access to joint testing, MoD codification, and innovation grants.
• EU-Ukraine Strategic Defence Industrial Partnership: eligibility for the new €1bn funding facility for joint production and procurement.

The typical failure mode isn't a bad partner — it's a good partnership executed in the wrong legal order. SSECU pre-approval before technical talks is the rule that saves deals.

Bottom line

A defence JV sits at the intersection of sanctions, corporate, antitrust and export-control law in two jurisdictions. Global Miltech Legal runs the full sequence — from partner KYC to Defence City residency — and acts as the single legal interface between the Ukrainian manufacturer and the Western partner.