Anti-Foreign Sanctions Law in China

Related Practices and Jurisdictions

On June 10, 2021, the People’s Republic of China passed the Anti-Foreign Foreign Sanctions Law (the “Law”). The main purpose of the law is to provide a legal basis for China to retaliate against so-called “discriminatory restrictive measures” imposed by other countries on Chinese organizations and citizens (the “foreign sanctions”). This means that foreign sanctions include not only OFAC sanctions, but almost all restrictive measures primarily against China, such as the export control restrictions for Chinese companies that are on the EAR’s Entity and MEU lists and the securities trading restrictions for the Non-SDN OFAC’s Chinese military-industrial complex company.

The retaliatory measures may be taken against organizations or individuals who are directly or indirectly involved in the formulation, decision-making or implementation of the foreign sanctions, including their related entities or persons, such as direct relatives, affiliated companies, etc. The retaliation measures may result in refusal of entry to China, Prohibition of Doing Business in and / or with China and Freezing of Assets in China.

The law also prohibits “any organization or person” from complying with foreign sanctions, and Chinese companies / citizens whose interests are harmed can sue an organization / person who abides by the foreign sanctions for damages in Chinese courts. “Any organization and person” likely refers to both Chinese and foreign organizations and persons.

For companies doing business in or with China, here are our top expectations:

  1. Private companies are unlikely to be subject to retaliation unless they participate in advocating, directing, or implementing foreign sanctions.

  2. Companies (including overseas companies / their subsidiaries in China as well as Chinese companies) can be sued in China for compliance with foreign sanctions, and this could include complying with US export control regulations by not delivering EAR items to a Chinese company the entity list, in which case “foreign law compliance” probably couldn’t be used as a defense. As a result, a company that complies with the foreign sanctions may be sentenced to pay damages.

  3. Businesses may find that they have to choose between complying with foreign sanctions or complying with Chinese laws.

© Copyright 2021 Squire Patton Boggs (US) LLPNational Law Review, Volume XI, Number 168

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