Earlier this month, the Governing Board (the Board) of the United States-Ukraine Reconstruction Investment Fund (the Fund) held its inaugural meeting, adopting its operating rules. The Fund was officially established in May 2025 by means of an agreement between the United States and Ukraine (the Agreement) in order to foster economic cooperation and support investments for the development of Ukraine’s natural resources and related infrastructure.
This blog post outlines the objectives and key terms of the Agreement, highlights potential legal rights for investors and suggests risk mitigation strategies.
The scope of the Agreement and its key terms
The Fund will support investments in natural resource mining and related infrastructure in Ukraine from investors based in the United States, the European Union and other States backing Ukraine’s defence against Russia’s invasion. “Natural resources” covered by the Agreement include sites, reserves and deposits of a vast list of mineral assets (such as, for example, copper, lithium or nickel) in Ukraine’s territory, as well as oil, natural gas (including liquified natural gas), and other hydrocarbons.
The Fund is established as a limited partnership, jointly owned and managed by the United States and Ukraine through the respective States’ agencies (the US-Ukraine Partnership). The US-Ukraine Partnership will enjoy exclusive and preferential rights with respect to investment projects in Ukraine, in particular:
- Investment Opportunity Rights. Licences and special permits for subsoil use of the relevant natural resources issued by Ukrainian authorities will include a provision requiring licensees and permit holders seeking to raise capital to disclose certain investment information to the US-Ukraine Partnership. The same will apply to public-private partnership contracts, concessions, and other agreements to construct or operate significant infrastructure assets that are up for approval by Ukrainian authorities. Should the US-Ukraine Partnership express interest in participating in such projects, investors must engage in good faith negotiations with the Partnership and may not grant third parties more favourable financial terms.
- Market-Based Offtake Rights. Licences and special permits will include a provision allowing the United States (or its designees and assignees) to negotiate offtake rights on market-based commercial terms during the licence or permit term. Investors will have to refrain from offering more favourable financial terms to third parties for the offtake of such products.
With regard to the contributions to the Fund, Ukraine will transfer 50% of the State budget’s revenue (royalties, licence fees, amounts payable under production sharing agreements etc.) from the issuance of new licences or special permits for the exploration, mining or other use of the relevant natural resources in Ukraine, as well as from the exploitation of any unexploited (“dormant”) licences and permits. A permit is considered “dormant” if no work has been carried out in the past ten years (or, if less than 1% has been extracted to date). As of May 2025, there were more than 150 “dormant” subsoil use permits in Ukraine.
For its part, the United States will contribute by way of the new military assistance (in any form) provided to Ukraine and, possibly, further funds. It is expected that for the first ten years, investment returns will not be shared between the United States and Ukraine but will be re-invested in new projects on the terms set out in the limited partnership agreement (the LP Agreement), which is not yet public.
Incentives for investors
While it is estimated that about 5% of the world’s critical minerals are in Ukraine, most of these remain undeveloped. The situation is further complicated by a lack of reliable, up-to-date geological data. This historic partnership aims to speed up development in the sector, opening up investment opportunities in Ukraine’s rich natural resources to foreign investors. Against this background, the Agreement offers preferential rights to the US-Ukraine Partnership, which include:
- Tax guarantees. The Fund’s income, the payments under the LP Agreement, as well as distributions and other payments from the Fund will not be subject to taxes, levies or other charges in Ukraine.
- Free transfer and conversion of funds. Subject to certain exceptions related to Ukraine’s macro-financial stability, Ukraine will ensure free convertibility and transferability of funds to the Partnership’s accounts. This should enable execution of payments under the Agreement “without cost, condition, or delay”.
- No less favourable treatment. Notwithstanding any new legislation adopted in the future, Ukraine will continue to accord to the US-Ukraine Partnership treatment no less favourable than that required by the Agreement. Further, Ukraine may not invoke the provisions of its domestic laws to justify any failure to perform its obligations under the Agreement.
It is understood that although these rights are granted to the US-Ukraine Partnership, they are meant to safeguard and foster the underlying investment projects. Any non-compliance or modification of the rights granted under the Agreement to the Partnership may in fact also impact the relevant investments, making them commercially less attractive and ultimately affecting their value. In order to ensure that legal risks are – to the extent possible – mitigated, it is paramount for foreign investors to consider available legal protections, and structure their investments accordingly.
Key contractual risks and mitigation strategies
In return for its investment, the US-Ukraine Partnership will have economic and governance rights in future projects. While at this stage it is unclear to what extent investors will be able to negotiate the relevant contractual terms with the Partnership, it may be beneficial to consider the following aspects:
- Degree of control. The degree of the US-Ukraine Partnership’s involvement in the projects must be clearly defined. Investors should aim to retain – to the extent possible – control over key decisions related to the investment, as well as any changes to the business or potential exit strategies.
- Decision-making. The Fund is organised as a limited partnership on a 50:50 basis, which means that neither the United States nor Ukraine will have a preferential vote. All important decisions would have to be made by consensus of a six-member Board (with three members from the United States and three from Ukraine). This means that both sovereigns – through their delegates – will have to align on major decisions to avoid deadlocks, which may prove difficult given the geopolitical issues involved. The interests of the US-Ukraine Partnership will have to be balanced with those of the investors. One would therefore need to ensure that the underlying contracts provide for a fair and effective decision-making process. This should include clear mechanisms available in case of tied votes and disagreements between the stakeholders.
- Dispute resolution. Ideally, investors should seek to include a dispute resolution clause to ensure the effective resolution of any claims. One way to achieve this may be to include an arbitration clause in the underlying investment contract, ensuring a neutral venue and a neutral applicable law (as opposed to litigation in Ukrainian or US courts). It is reported that the LP Agreement (not yet publicly available) provides for Delaware law to apply to the limited partnership matters and New York law to corporate matters with disputes to be solved by a three-member ad hoc tribunal seated in London.
Available investment treaty protection
Moreover, investment risks are inherent in any long-term project requiring significant upfront commitment of capital. The investment projects the Agreement aims to foster are no exception. In an ever-changing geopolitical environment, this inevitably carries risks of uncertainty, particularly in highly volatile markets such as Ukraine.
International investment treaties provide a number of legal protections to foreign investors, including the possibility to seek compensation for damages caused to their investments via international arbitration. Foreign investors could bring claims directly against Ukraine under one of its 65 bilateral investment treaties (BITs) in force, including those with the United States and with many EU Member States. Investors need to ensure that their investments are covered and protected by the relevant BITs.
In the long term, one area where we envisage possible policy shifts or legislative changes is Ukraine’s accession to the European Union (the EU). There were several significant steps forward in this regard:
- Ukraine has already made extensive commitments under the EU-Ukraine Association Agreement signed in 2014, which identifies the areas where Ukraine needs to harmonise its domestic legislation with EU law. For example, Ukraine must ensure the enforcement of competition law, which should gradually be aligned with EU law.
- In recognition of its progress in implementing the Association Agreement, on 23 June 2022, Ukraine was granted candidate status for accession to the European Union. This paves the way for the accession negotiations, during which the EU and Ukraine will identify further areas where harmonisation is needed calling for further legislative changes.
The incentives to be granted under the Agreement raise concerns as to their potential non-compliance with EU law, particularly EU competition law. For instance, any financial assistance provided by the Fund to projects might qualify as unlawful State aid giving an investor an unfair advantage over its competitors. In such case, if Ukraine is to harmonise its competition laws with EU law, certain incentives under the Agreement may need to be reviewed and even revoked as incompatible with EU law. This could in turn impact the rights of investors who may want to seek redress for the damages caused to their investments by such changes.
In this context, EU investors seeking to benefit from the Fund’s support may be advised to consider structuring their investments through their non-European subsidiaries. This would ensure that EU law does not constitute an obstacle to the enforcement of investors’ rights under applicable investment treaties (for more details, see our previous blog on this).
Outlook
The Agreement is an important step in strengthening economic relations between Ukraine and the United States and has the potential to attract foreign investment to support Ukraine’s recovery and reconstruction. The Agreement envisages cooperation for decades to come, with many steps to be taken by investors with the support of the US-Ukraine Partnership before exploration and mining can begin. Once the Agreement has been fully implemented, it will be important to see how it aligns with any potential peace framework agreement. Other States supporting Ukraine’s reconstruction and defence efforts may also be willing to benefit from co-investing in Ukraine’s natural resources, which could lead to changes and rearrangements to the initial plan.
