23 June 2021

China's new law countering foreign sanctions adds to conflicting compliance requirements

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China recently enacted a new law - effective from 10 June 2021 - to protect China's nationals and organisations from discriminatory restrictive measures imposed by foreign countries. It provides for the compilation of a Countermeasure List of parties involved with the enacting of such foreign restrictive measures and some of their affiliates, against which countermeasures can be imposed. These include deportation from China or the freezing of property within Chinese territory. The new law requires the implementation of these countermeasures and prohibits implementation of foreign restrictive measures. This means that international business may again be confronted with conflicting compliance requirements under Chinese and foreign sanctions and other restrictive measures. Multinational companies are therefore advised to closely follow further developments and take preparatory measures to mitigate their risk.

The Act on Countering Foreign Sanctions

In order to safeguard China's national sovereignty, security and development interests, the purpose of the new law is threefold. First, it aims to counter discriminatory restrictive measures imposed by foreign countries. Second, it establishes a legal basis for some sanctions previously imposed by China and certain existing regulations relating to foreign affairs and restrictive measures; notably, the Unreliable Entity List (UEL) (see our article here), certain provisions in the Export Control Law (see our article here) and the Blocking Rules (see our article here). The third aim is for the act to serve as a legal basis for any similar future regulations.

No official English translation has been released, but an unofficial translation is available here.


Over the past few years, China has faced a range of sanctions imposed by the US and more recently also by the EU. In response, China has started to impose its own sanctions. For example, after the U.S. Department of Treasury added 14 members of the National People's Congress (NPC) to the Specially Designated National List (SDN List) over Hong Kong-related issues in December 2020, China's Foreign Ministry took action in January 2021. It announced sanctions against 28 US officials for gravely interfering in China's internal affairs and disrupting the? US-China relationship. The former U.S. Secretary of State was one of those officials. Similarly, China blacklisted 10 EU individuals and 4 entities for "severely damaging China's sovereignty and interests, and maliciously spreading lies and false information" in March 2021. This happened on the same day that the EU announced sanctions against four Chinese officials and one entity over Uyghur human rights violations, the first EU sanctions against China since 1989.

These sanctions, however, lacked a legal basis in Chinese law. The NPC therefore prioritised the introduction of legislation establishing such legal basis. This likely explains the swift and unusual legislative process: no draft was released for public consultation and after a secret first reading in April 2021, the new law was adopted at the second reading, without the usual third reading taking place.

Conditions for applicability

According to article 3 of the new law, China will have the right to employ "corresponding countermeasures" where, in violation of international law and basic norms of international relations, foreign nations:

  • contain or suppress China under any kind of pretext or based on the laws of those nations
  • employ discriminatory restrictive measures against China’s citizens and organisations
  • interfere with China’s internal affairs.

The term “discriminatory restrictive measures” has not been defined, leaving ample room to act on a range of foreign measures targeting China. It is clearly broader than just sanctions and is intended to also cover, for example, export control restrictions targeting China or Chinese companies. What other restrictive measures may be targeted, remains unclear.


Article 4 allows the relevant departments of the State Council to compile a Countermeasure List, including both individuals and organisations that directly or indirectly participated in the drafting, decision-making or implementation of discriminatory restrictive measures, as mentioned in article 3.

Article 5 furthermore allows countermeasures to be employed against:

  • the spouse and immediate relatives of individuals on the Countermeasure List;
  • senior managers or actual controllers of organisations on the Countermeasure List;
  • organisations in which individuals on the Countermeasure List serve as senior management;
  • organisations in which persons on the Countermeasure List are the actual controllers or participate in establishment and operations.

This substantially broadens the scope of parties that may be subject to countermeasures, including parties that were in no way involved with the foreign discriminatory restrictive measures that they seek to counter. This may create a serious risk for individuals and companies that have relevant links to persons or companies on the Countermeasure List. In order to mitigate such risks, they may even choose to sever their ties with any listed persons: for example, a company may opt to remove a listed individual from its senior management.

Pursuant to article 7, any decision to include any party on the Countermeasure List based on article 4, or impose countermeasures against any parties related to them in accordance with article 5, is "a final decision". This means that there is no space for administrative or judicial remedies. These decisions can only be suspended, modified or cancelled at the sole discretion of the relevant departments of the State Council. However, no procedure for suspension, modification or cancellation is specified in the new law.

Authorised countermeasures

Pursuant to Article 6, the relevant departments of the State Council may decide to employ one or more of the following measures:

  • not issuing visas, denying entry, cancelling visas or deportation;
  • sealing, seizing or freezing movable property, real estate and all other types of property within the territory of China;
  • prohibiting or restricting relevant transactions, cooperation and other activities with organisations and individuals within the [mainland] territory of China;
  • other necessary measures.

The measures provided in the first three paragraphs are, by and large, similar to those that can be imposed under EU and US sanctions law. However, unlike EU and US sanctions, paragraph 4 allows the authorities unlimited discretion as to the measures that can be imposed.

Again, pursuant to article 7, any decision to impose such measures is final and cannot be appealed, but only suspended, modified or cancelled at the sole discretion of the relevant departments of the State Council.

Article 13 furthermore leaves room to provide for additional countermeasures in related and future legislation. No indication is provided as to what such further legislation may entail.

Obligation to implement countermeasures

Article 11 requires individuals and organisations “within the territory” to implement the relevant countermeasures. This would include Chinese subsidiaries of foreign companies. For example, Chinese subsidiaries of foreign banks will have to assist in the freezing of accounts of listed persons if such measures are imposed on them. Article 11 furthermore provides that the relevant departments of the State Council "shall address" organisations and individuals that violate these provisions in accordance with law and restrict or prohibit their engaging in related activities. Article 14 casts the net wider, providing that any organisation or individual that does not enforce or cooperate in implementing any countermeasures imposed, is to be "pursued for legal responsibility". Both article 11 and article 14 do not stipulate whether such enforcement will be based on civil, administrative or criminal law.

That article 11 explicitly refers to individuals and organisations “within the territory” suggests that Chinese nationals residing or acting abroad would not be bound by this provision. However, article 14 is not explicitly limited to individuals and organisations “within the territory” or even to Chinese individuals and organisations. The new law does not clarify the implications of the apparently extra-territorial applicability of this article. Nonetheless, it would seem that foreign subsidiaries of Chinese companies will have to refrain from doing business with any party that is subject to countermeasures under the new law, at the risk of exposing themselves to "legal responsibility" under article 14 and their parent company to enforcement under article 11. Similarly, this likely means that Chinese nationals working abroad cannot get involved in (and would need to recuse themselves from), transactions with any party included on the Countermeasure List, or otherwise risk being "pursued for legal responsibility".

Prohibition against enforcing foreign discriminatory restrictive measures

Article 12 provides that organisations and individuals must not enforce or assist in enforcing foreign discriminatory restrictive measures against China. Article 12 furthermore provides that if any organisation or individual violates this provision, infringing on the interests of Chinese citizens or organisations, Chinese citizens or organisations may initiate litigation in China's courts, requesting that the infringement be stopped as well as claiming compensation.

This means that organisations and individuals in China will in any case have to refrain from giving effect to relevant foreign restrictive measures. The term "discriminatory restrictive measures employed by foreign nations" remaining undefined may cause uncertainty as to what measures qualify and thus what measures they can and cannot comply with.

With article 12 not limited to the territory of China or to Chinese individuals and organisations, the question of what is its relevance for foreign companies giving effect to the foreign restrictive measures arises; for example, by complying with US export controls targeting China. Civil enforcement in Chinese courts against such parties pursuant to article 12 may not be feasible. However, these companies may potentially be at risk of being placed on (and facing measures under) the UEL (see our article here).

The new law gives Chinese companies affected by compliance with foreign discriminatory restrictive measures a broader right of action than the Blocking Rules (see our article here). Whereas pursuant to the Blocking Rules Chinese parties can file a claim only if the relevant restrictive measures have been blocked by a prohibition order, no such prohibition order is required under the new law.

The new law also provides a right of action in civil courts to parties affected by compliance with foreign export controls, while the Export Control Law does not include such right of action.

Article 12 does not provide for administrative or criminal enforcement.

Competent authorities

The new law points to the “relevant departments of the State Council” as the competent authorities to administer it, without specifying which administrative bodies this may concern. However, it is likely that the Ministry of Foreign Affairs and the Ministry of Commerce (MOFCOM) will play the leading roles in coordinating other departments under the “work coordination mechanism” to be established under article 10.


The new law again shows China’s determination in countering foreign sanctions and export controls and other restrictive measures affecting Chinese interests. Together with the recently enacted UEL, Export Control Law and Blocking Rules, China can avail itself of a comprehensive toolbox to defend its interests against foreign restrictive measures. For international companies active in or doing business with China, the new law adds to the risk of facing conflicting compliance requirements relating to sanctions, export controls and potentially other restrictive measures. This risk is compounded by the fact that, for now, many questions about the exact scope and application of the new law remain unanswered.


Despite the uncertainty about the scope and application of the new law, companies active in and doing business with China can take various risk mitigation measures already.

First, they should mitigate the risk for their Chinese entities and employees. To that end, they would be well advised to update their relevant compliance programmes, provide for screening against the Chinese Countermeasure List and initiate training for relevant staff. In addition, they may want to update relevant compliance statements and contracts; for example, providing for an exit if the contract cannot be performed due to certain countermeasures. Companies may also want to consider the risks for their Chinese employees working outside China, as the new law seems to require that they refrain from getting directly or indirectly involved in transactions involving any party on the Countermeasure List.

Second, it would be prudent for these companies to make an assessment of foreign restrictive measures targeting China that may be relevant to their business and of the risk of any Chinese group entities or employees (directly or indirectly) giving effect to them, which involvement may then need to be reconsidered. Such an assessment could tie in with a broader assessment of the potential implications of complying with such measures throughout the group, also under the UEL, Export Control Law and Blocking Rules.

More generally, companies might wish to closely follow further legislative and enforcement developments, as they may provide more clarity on the scope and application of this sweeping new law.