The US government could soon allow private US military contractors to operate in Ukraine to maintain and service weapons supplied by the United States (the "MC Policy"), according to a recent CNN news report. This type of operation has been effectively banned since the start of the Russian invasion of Ukraine in February 2022, such that weapons systems have been maintained and repaired remotely or in neighbouring NATO countries.
POTENTIAL POLICY
The MC Policy under consideration would lift the existing de facto ban, allowing US military contractors to be deployed to Ukraine to assist in the upkeep and repair of US-supplied weapons. The anticipated arrival of multirole fighter aircrafts in Ukraine, which require regular maintenance, has reportedly influenced the development of the MC Policy.
The MC Policy is still under review by administration officials and awaits final approval from President Biden. It follows a pattern of key developments demonstrating steadfast US support for Ukraine, including:
- The US government's announcement on 11 July 2024 of a $225 million new military assistance package for Ukraine; and
- The US and Ukraine's signature, on 13 June 2024, of a historic 10-year Bilateral Security Agreement. The agreement aims to bolster Ukraine's defence capabilities, support its economic recovery, and accelerate its Euro-Atlantic integration, sending a clear message of unwavering US support for Ukraine's sovereignty and security against Russian aggression.
While the MC Policy is only proposed at this stage, the following developments suggest that it has good prospects of being approved by the US President and subsequently implemented:
- According to the President of Ukraine's official website, Volodymyr Zelenskyy met with several leading US defence companies to discuss their potential entry into the Ukrainian market and cooperation with local companies. These discussions emphasised the increased need for international cooperation.
- At the same meeting, Ukraine's JSC Ukrainian Defence Industry signed an agreement with a US company for the production of a first-ever US medium-calibre ammunition production facility in Ukraine, adhering to NATO standards. Similar agreements have previously been made with German and French contractors.
- On 24 April 2024 the US Congress passed the Rebuilding Economic Prosperity and Opportunity for Ukrainians Act, prohibiting the release of nearly USD 6 billion of frozen Russian sovereign assets based in the United States, as well as allowing confiscation and allocation of these resources into two newly created funds to support Ukrainian reconstruction efforts.
Looking ahead, if the MC Policy is implemented, the tendering process among US contractors would likely begin swiftly after the implementation date, leading to a significant presence of US contractors in Ukraine.
INSURANCE AND OTHER CONSIDERATIONS
Beyond obvious concerns about the safety and security of staff and facilities, US military contractors will face insurance challenges when entering Ukraine's military market.
The latest Travel Advisory published by the US Department of State on 22 May 2023, warns US citizens "not to travel to Ukraine due to active armed conflict". This affects insurance availability, price, and coverage for US citizens and businesses. While some global actors in the insurance field have started taking proactive measures to tackle the problem, the MC Policy may lead to increased demand and, hence, create the market, as well as potentially expand the scope and suitability of terms of relevant insurance.
Relatedly, the United Kingdom's Foreign, Commonwealth & Development Office (the "FCDO") has recently published updated travel advice for Ukraine. Eight western regions of Ukraine have been recategorised from "red" (the FCDO advises against all travel) to "yellow" (the FCDO advises against all but essential travel), namely:
- Zakarpattia;
- Ivano-Frankivsk;
- Ternopil;
- Chernivtsi;
- Lviv;
- Volyn;
- Rivne; and
- Zhytomyr.
This travel update could potentially simplify the procurement of insurance and the organisation of other travel arrangements for foreign businesses in the above-listed eight regions of Ukraine, should they decide to operate in Ukraine notwithstanding the ongoing armed conflict.
NEXT STEPS
The potential deployment of US military contractors to Ukraine marks an important and promising policy shift. However, if the MC Policy is implemented, US companies looking to enhance their cooperation with Ukraine during this critical time of ongoing armed conflict will encounter a range of complex cross-border issues. These include regulatory compliance, availability of insurance, procurement, export control, and other regulatory requirements, in addition to standard commercial considerations.
Mayer Brown is well-placed to assist US companies in successfully navigating these challenges, with:
- our extensive experience across various practices, including Global Mobility and Migration, Government Contracts, Sanctions and Export Controls and National Security; and
- our cross-office teams including Ukrainian-qualified and Ukrainian-speaking lawyers.
Mayer Brown remains committed to closely monitoring these developments and will provide further updates accordingly.
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