On 22 August 2018, a law went into force in Ukraine banning the compulsory enforcement of judgments for the payment of debts by strategically important local defence enterprises to entities connected to any country recognised as an occupying state or aggressor.

The Law on Amending Laws of Ukraine Concerning Solving Certain Issues of Indebtedness of Enterprises of Defence Industry Complex – Members of State Concern Ukroboronprom before the State-Aggressor and/or Occupying State and Ensuring Their Stable Development (“Law”) will affect the ability of Russian companies to collect debts from strategically important Ukrainian defence enterprises, since the law targets entities that have their place of incorporation or executive organ on the territory of a state recognized by Ukrainian Parliament as an aggressor or occupying state (such as the Russian Federation) (the “Aggressor State”), or are otherwise controlled or managed from this territory.

The Law's prohibition also applies to legal entities, in which the Aggressor State holds interest (together “Aggressor State Entities”).

According to the Law, any enforcement proceedings related to such judgments must be suspended, and no bankruptcy proceedings can be lodged against a strategically important defence enterprise based on a petition from an Aggressor State Entity.

These prohibitions also extend to enforcement proceedings and bankruptcy petitions based on claims originally held by Aggressor State Entities, but transferred to third parties. In addition, the Law prohibits the recognition and enforcement of foreign court judgments for the recovery of debts from strategically important Ukrainian defence enterprises in favour of Aggressor State Entities.

Companies seeking to do business with Ukrainian defence enterprises should avoid structuring their deals with involvement of any entity linked to the Russian Federation.

Source: Law On Amending Laws of Ukraine Concerning Solving Certain Issues of Indebtedness of Enterprises of Defence Industry Complex – Members of State Concern Ukroboronprom before the State-Aggressor and/or Occupying State and Ensuring Their Stable Development No. 2508-VIII