The five-year long negotiations over the Association Agreement were concluded, but EU leaders made it clear that the deal would not be signed until improvements are made to the "quality of democracy and rule of law" in Ukraine.
European Council President Herman Van Rompuy spoke of a "difficult atmosphere" between the European Union and Ukraine.
"Our strong concern is primarily related to the risks of politically motivated justice in Ukraine. The Tymoshenko trial is the most striking example," Van Rompuy said, referring to the case of the former prime minister who is serving a seven-year sentence for abuse of power.
A video clip showing an imprisoned Tymoshenko created a storm in Ukraine just days before the EU-Ukraine summit took place in the nation's capital. The clip showed the former prime minister in her sickbed waving her arms in anger at a man in a room in the prison's medical wing.
The video clip was aired on TV with the apparent aim of showing Tymoshenko was being well treated. In particular, the footage focused on a refrigerator and air-conditioner in her prison cell.
A comprehensive justice reform in line with international standards was "absolutely key" for Ukraine, Van Rompuy added. "Media freedom and freedom of assembly are also key for a full fledged democracy. Shortcomings have to be corrected," he said.
Van Rompuy also made it clear that the country's association agreement, which includes a Deep and Comprehensive Free Trade Area (DCFTA), would not be signed until the parliamentary elections in Ukraine due in October 2012.
EU to watch the October election
The Parliamentary elections will be "a litmus test" with the Union scrutinising them to ensure a level playing field for all candidates and that they can exercise their rights.
On 8 December the Ukrainian parliament approved a new electoral law which re-established a mixed electoral system with a representation threshold set at 5% of votes. The current parliament was elected through proportional voting with a 3% threshold. According to the new electoral system, 225 MPs of the 450-seat Verkhovna Rada would be elected through party lists and 225 MPs through single-member constituencies.
The new law establishes that no blocs of political parties are allowed to participate in the elections.
The Council of Europe's Venice Commission, which specialises in providing constitutional advice in the new democracies of Central and Eastern Europe, has expressed concern about changes in the electoral system imposed unilaterally by the majority against the wishes of the opposition parties.
Gas talks with Russia proceed in parallel
Ukrainian President Viktor Yanukovich thanked Van Rompuy and Commission President José Manuel Barroso for the "frank discussion", adding that for his country, the Association Agreement was a "key instrument" for EU integration.
"Ukraine proceeds from the fact that every European state may apply for the EU membership under the condition of meeting the criteria enshrined in the Founding Treaty on European Union," he said.
Referring to his country's natural gas negotiations with Russia, seen by many as a geopolitical test for Ukraine in its relations with its former Soviet "big brother", he said: "If you are interested in what state are the negotiations between Ukraine and Russia, I will tell you – [they are] in a difficult state".
Yanukovych noted that the negotiations have been going on for nearly two years. He called the demands of Ukraine to Russia "quite understandable" in terms of the high price for gas, negotiated by Tymoshenko in 2009.
"And today, despite the fact that the so-called ‘Kharkiv discount’ of one hundred dollars per thousand cubic metres is in force, Ukraine still pays the greatest price for gas compared with other countries, the EU countries. This burden is extremely heavy for us," Yanukovych said.
"These negotiations continue. It is hard to say, how will they end. There is still no answer to this question yet," Yanukovich said.
According to experts, Russia and Ukraine may agree for a lower price of gas in exchange for Russia's Gazprom taking control of the country's pipeline network.