As the world watches Ukraine’s fierce resistance to Russia’s illegal invasion, a parallel narrative unfolds – a tale of resilience, innovation and the birth of unforeseen economic prospects. International businesses, take note: the reconstruction of Ukraine is not just a moral imperative; it is a frontier teeming with potential, particularly in the energy, tech and telecoms, agriculture, and construction sectors. Yet, while these sectors beckon with opportunity, they are shadowed by the intricacies of legal risks. The task ahead requires navigating of complex legal landscapes in the pursuit of rebuilding a better, stronger Ukraine.
 
This renewed focus on Ukraine’s reconstruction – estimated to cost more than $500bn – is not mere speculation; it is backed by substantial financial commitments. By the end of the June 2023 Ukraine Reconstruction Conference, a total of $60bn in international commitments were made to support the reconstruction of Ukraine. In addition to pledges from governments and inter-governmental institutions, more than 400 global companies pledged support to rebuild Ukraine’s war-torn economy. Of significant note, the Ukrainian Ministry of Economy is working with US private investment companies to establish the Ukraine Development Fund, designed to mobilise capital from the private sector. Furthermore, if adopted, US and UK proposed new legislation would allow the seizure of hundreds of billions of dollars of frozen Russian public and private assets to finance the reconstruction. 
 
The reconstruction efforts are multi-phased: short-term initiatives will address the immediate restoration of critical infrastructure, with utilities and strategic transport networks receiving priority. This includes addressing damaged utilities, strategic transport networks (roads, bridges, ports, airports), and bolstering technology infrastructure to enhance cyber-security capabilities. Several large US and European tech and construction companies have begun deploying their expertise on the ground for the Ukrainian government.
 
As we gaze further into the future, the medium-to-long term reconstruction pans out to encompass a much broader scope, integrating Ukraine’s economy with the European Union. Here lies a wide range of projects, each interwoven with potential for foreign businesses. 
 
Ukraine’s bold 2050 Energy Strategy epitomises this vision – targeting renewable energy, climate neutrality, integration with EU energy markets and an overhaul of energy sources. The strategy embodies an aggressive shift towards renewable energy, with significant increases in wind, solar, nuclear and bioenergy capacities. It is a call for innovation and investment, especially pertinent for entities in the nuclear, renewable energy and gas sectors. 
 
In the tech and telecoms sector, Ukraine’s bid to transform into a digital hub presents yet another fertile ground for investment. Initiatives are already in motion, aiming to fortify connectivity and digitalise public services. 
 
The construction of new infrastructure, from housing to high-speed rail links within Ukraine and between Ukraine and the EU, further underlines the broad spectrum of opportunities that lay ahead. 
 
As investors’ eyes turn to these opportunities, they must navigate a labyrinth of legal risks. Identifying the right projects, navigating procurement processes, securing financing and managing collateral in a market still finding its regulatory footing are just some of the challenges businesses must contend with.
 
Lack of transparency and corruption risks can expose companies to potential liability under legislation such as the UK Bribery Act and US Foreign Corrupt Practices Act. Those who participate in reconstruction efforts using public money may be subject to scrutiny from various US, EU, UK and other government agencies or legislatures and international bodies such as the EBRD (European Bank for Reconstruction and Development), EIB (European Investment Bank) and World Bank. The post-war reconstruction experiences in Iraq and Afghanistan, where contractors faced long-term legal and parliamentary investigations, underline the serious repercussions of non-compliance. Companies engaged in reconstruction projects must assume their conduct will be intensely scrutinised, necessitating rigorous compliance programmes, due diligence, operational procedures and consistently documenting all actions and decisions.
 
Since it is unlikely there will be a “clean victory” in the immediate future, the need for robust war-risk insurance also becomes paramount. Here, ingenuity meets prudence; the UK government’s collaboration on an insurance scheme could well be a blueprint for safeguarding investments in Ukraine’s reconstruction. Other countries have announced similar schemes; for example, the French state-owned insurance company Bpifrance Assurance Export will insure French companies and credit institutions investing in or financing reconstruction projects against war-related risks of property damage or non-payment, non-transfer, expropriation or political violence.
 
Other areas of legal risk include compliance with US, EU, UK and Ukrainian sanctions laws, particularly concerning diversion risks to Russian-controlled Ukrainian territories subject to comprehensive embargoes. Export controls on goods, software and technology, especially in the nuclear and tech sectors, add another layer of regulatory navigation. Litigation risks loom as well, with potential claims against insurers for foreign-owned assets impacted by the conflict, and unresolved questions about the distribution of frozen Russian assets. Furthermore, in contract drafting and negotiations, choices regarding law, jurisdiction and dispute resolution require careful consideration. English or New York law will likely be preferred, with international arbitration as a favoured dispute resolution method, acknowledging Ukraine’s adherence to the New York Convention on the recognition and enforcement of foreign arbitral awards. However, certain contracts might require compliance with Ukrainian law and jurisdiction, introducing distinct legal and enforcement risks.
 
In sum, Ukraine presents a complex tapestry of opportunity interwoven with risk – a dynamic market for those with the vision to see beyond the horizon, and the wisdom to tread carefully through legal risks inherent to a post-conflict economy. Companies must not only bring financial muscle but also legal acumen – armouring themselves against potential pitfalls by investing in local legal expertise, adhering strictly to international compliance standards, drafting contracts with precision and considering the appropriate legal jurisdiction and dispute resolution mechanisms, and remaining agile in the face of a transforming regulatory environment. For the intrepid investor, Ukraine could be a canvas of possibility; for the cautious, a legal quandary. The balance lies in due diligence, ethical engagement and a strategic approach that embraces the new Ukrainian spirit – undaunted, forward-looking and brimming with untapped potential.

Matthew Oresman is a partner at Pillsbury Winthrop Shaw Pittman, Iris Karaman is an associate and Diana Danyshenko is a paralegal.