The suspension of U.S. funding for projects in Ukraine poses significant challenges for organizations implementing these initiatives, particularly because the organizations were working with a variety of contractors, including equipment suppliers, construction contractors, consultants, trainers, and other professionals. In addition, they were employing their own staff to perform project management, financial accounting, communications, and other critical functions.
The funding freeze has left organizations unable to meet their financial obligations to contractors and employees, creating the risk of lawsuits from suppliers and contractors who have not received payment for goods or services provided.
It should be noted that the decision of the government of another country does not affect Ukrainian legislation and contractual relations between Ukrainian counterparties and obligations must be properly performed in accordance with the terms of the contract and the requirements of the law. The suspension of US funding does not exempt Ukrainian organizations from fulfilling their obligations to counterparties, unless otherwise provided by contract or law.
The same applies to relations with employees who are registered under an employment contract, i.e. dismissing employees based on lack of funding - It is not possible. If team members work on the project as sole proprietors, then the contract can be terminated only for reasons stipulated in the contract itself.
What should organizations do if funding is terminated?
- Check contracts with counterparties for conditions regarding their termination.
- Immediately notify counterparties of any circumstances that make it impossible to fulfill obligations, providing supporting documents.
- Negotiate with counterparties to reach mutually acceptable solutions, such as deferring obligations, changing the terms of the contract, or terminating it by mutual consent.
Ukrainian organizations that have faced funding suspension must act in accordance with the terms of the concluded contracts and the norms of Ukrainian legislation. Failure to fulfill obligations may lead to legal claims from counterparties. In any case, it is important to maintain open communication with counterparties and jointly seek ways to solve the problem.
