Alex Frishberg, Esq.
Given the scale of the destruction in Ukraine, countries including the United States, the United Kingdom, Poland, Germany and France, have all expressed their desire to help rebuild Ukraine’s infrastructure. The estimated cost is $750 billion necessary for post-war reconstruction, with the international donors including the United States, the EU and its member states, as well as international financial institutions.
Of course, foreign companies and international partners can play a critical role by bringing global expertise to Ukraine reconstruction, but they will require open access and transparent rules, especially in the notoriously bureaucratic area of construction business.
Below we review the current Ukrainian legislation governing construction during martial law, as well as recent developments that will allow foreign companies to participate in Ukrainian construction projects with minimal licensing requirements during martial law.
- Current Ukrainian Construction Legislation
On March 18, 2020, Ukrainian legislation abolished architecture and construction licensing, including the list of services subject to a license and the procedure and conditions of licensing in construction. This effectively terminated any issuance of new licenses, barring any new construction companies from entering the market.
Today, the Law of Ukraine “On Licensing of Economic Activities” requires a license for construction (construction and installation works) of СС2 and CC3 facilities (consequences classes). By way of background, objects with medium (СС2) consequence class are residential buildings five floors or more in height. Objects with significant (CC3) class consequence are multi-apartment residential buildings over 100 meters high, large public buildings, industrial facilities, universities, colleges, schools, preschools, shopping malls, hospitals, etc.
Note that construction of CC1 facilities does not require a license in accordance with Resolution No. 722 of the Cabinet of Ministers of Ukraine, dated July 12, 2022, which allows construction of individual residential, garden and country houses up to two floors (not including the attic) with an area of up to 500 square meters, as well as utility buildings and structures, garages and landscape design elements of the land plot, to be carried out without obtaining a construction permit for land plot development.
- Construction Permits During Martial Law
State Construction Norms and State Sanitary Norms set specific standards for the construction of buildings, including buildings of minor (CC1), average (CC2) and significant (CC3) consequences classes. Whether construction requires a building permit depends on the building’s construction class and complexity, so the requirements, procedure and basic list of permit documents differ on a case-by-case basis. For example, objects in group CC3 undergo the most complex and lengthy procedure.
Constructing buildings with minor consequences (CC1) may begin with the developer’s notification of commencement of construction work, submitted to the local department of the State Inspectorate for Architecture and City Development. After construction is finished, buildings with minor consequences (CC1) are commissioned based on the developer’s written declaration confirming that construction has been completed and the building is ready for operation with subsequent registration of such declaration with the local department of the State Inspectorate for Architecture and City Development.
In case of construction of buildings of average (CC2) and significant (CC3) consequences classes, the State Inspectorate for Architecture and City Development has to issue a building permit in order to commence construction work. After construction is finished, buildings of average (CC2) and significant (CC3) consequences classes are put into operation after the State Inspectorate for Architecture and City Development issues a “fit for operation” certificate.
Other laws regulating the construction process include the Law of Ukraine “On Energy Efficiency of Buildings,” which sets certain minimum requirements for the energy performance of the buildings, both newly built as well as existing. The law also introduces so-called energy certificates, which must be obtained for any complex object of construction (CC2 and CC3), be it new construction, reconstruction or capital repairs. Energy certificates contain information on the energy performance of the building and recommendations for improvement, and they are valid for 10 years.
Today, when concluding sale-purchase or lease agreements for a new building, the seller or lessor (landlord) must provide the potential buyer or lessee (tenant) with a copy of the energy certificate. In addition, the expected class of energy efficiency of the building, determined by the project documentation for the construction of the object, is often an essential condition of transactions involving acquisition of premises in new construction objects.
Furthermore, on September 1, 2022, additional state building standards came into force. They significantly changed safety regulations for buildings and structures, mechanical resistance and stability, energy efficiency, barrier-free accessibility, environmental requirements, and fire safety issues. These standards also establish new requirements for construction of such facilities as refrigerators, warehouses, and silos for grain.
- Ukrainian Contractor Certification Rules
Today, Ukrainian construction companies are required to have certified specialists (engineers and architects), who are responsible for construction projects and supervise construction of CC2 and CC3 facilities. Such certified contractor is liable for improper performance and violations of legislative requirements, building codes, state building standards, and other regulations.
The following services are subject to professional certification:
• Development of urban-planning documentation;
• Architectural and civil engineering design;
• Expert assessment and inspection in construction;
• Technical supervision;
• Engineering activities and coordination of all construction participants.
The introduction of certification of a responsible contractor did not abolish licensing itself. The Law “On Regulation of Urban Development” still requires licensing of construction companies that build projects with medium and significant consequences. However, since it is currently impossible to obtain such a license, only companies that already have a license can engage in construction of CC2 and CC3 objects. Moreover, new rules for certifying specialists have been adopted only partially (while the old ones have already been cancelled), which makes it extremely difficult to obtain proper certificates.
In the meantime, Resolution No. 314, dated March 18, 2022, approved temporary rules (during martial law only) for obtaining construction permits, and within 3 months after the end of martial law (or sooner, if relevant regulations are adopted), the developer must obtain new permits to properly formalize its activities.
- Foreign Construction Companies in Ukraine
As an exception to the above requirements, on August 6, 2024, the Cabinet of Ministers has passed a resolution that amended Resolution No. 314 of March 18, 2022. At long last, foreign construction companies now have the right to engage in construction activities in Ukraine during martial law under a simplified procedure, without the need to obtain a license to build large-scale structures and facilities.
Specifically, over the duration of martial law foreign companies that conduct activities in Ukraine through permanent representative offices may carry out the construction of objects with medium (CC2) and significant (CC3) consequences simply by submitting to the licensing authority a declaration, containing all relevant information, full company description, construction plans, etc. The submission may take place in electronic form through the Diia Portal or via hard copy.
The new Cabinet of Ministers resolution opens unprecedented opportunities for foreign construction companies with Ukrainian representative offices, allowing them to start reconstructing Ukraine during the times of war. After the war, when the martial law will be lifted, foreign construction companies will have up to three months to obtain the relevant permit documents according to the procedure, terms and conditions set by applicable legislation at the time.
- Conclusion
After the war ends, the scale and complexity of the Ukraine reconstruction will require not only significant financial resources, but also experienced foreign construction companies that will insist on minimal government bureaucracy before they enter the market.
