China Boosts Enforcement of Anti-Foreign Sanctions Law
In Short
The Situation: China has recently taken several actions showing its commitment to counter trade restrictions imposed by other countries. In March 2025, it released regulations implementing the 2021 Anti-Foreign Sanctions Law. In tandem with these regulations, China's Supreme People's Court ("SPC") published its first decision interpreting the regulations' new private enforcement mechanism, potentially laying the groundwork for future activity.
The Result: The Regulations on Implementation of the Anti-Foreign Sanctions Law (the "Regulations") prioritize certain aspects of the Anti-Foreign Sanctions Law and the Countermeasure List, and further encourage private persons to bring lawsuits for asserted infringement upon their lawful rights and interests against individuals and companies that execute or assist in the execution of discriminatory restrictive measures of a foreign country.
Looking Ahead: Together with the first private case under the Anti-Foreign Sanctions Law, the Regulations will likely increase the number of private actions in Chinese courts against multinational companies, which should carefully evaluate their exposure to potential litigation and take any precautions as needed.
The Regulations, comprising 22 articles, shed light on how China will implement the Anti-Foreign Sanctions Law and the Countermeasure List (as discussed in the Jones Day Commentary, China Enacts Law to Counter Foreign Sanctions). Specifically, the Regulations:
- Specify countermeasures such as the seizure and freezing of "various types of property" and the prohibition or restriction of "relevant transactions and cooperation";
- Define "other necessary measures" that can be imposed upon an entity on the Countermeasure List;
- Clarify the duties of and the coordination among relevant State Council departments in implementing the Anti-Foreign Sanction Law; and
- Refine the procedural rules for the suspension, modification, and cancellation of countermeasures.
Since the Anti-Foreign Sanctions Law took effect on June 10, 2021, China's Ministry of Foreign Affairs ("MOFA") designated 59 foreign entities and 63 individuals on the Countermeasure List, each thought to have compromised China's national security and development interests for various reasons.
The Anti-Foreign Sanctions Law and the Regulations prohibit executing foreign "discriminatory restrictive measures" against Chinese individuals and companies, and allow persons to bring litigation for damages. But in practice, Chinese laws are silent on which foreign legislations and measures constitute "discriminatory restrictive measures" which should be blocked in China.
According to China's Blocking Rules (discussed in the Jones Day Commentary, China Releases Rules to Address Extra-Territorial Applications of Foreign Laws), the Ministry of Commerce ("MOFCOM") is authorized to issue a prohibition order, through which a foreign legislation or measure will not be accepted or observed in China. Over the past several years, although MOFCOM and MOFA have publicly denounced certain foreign legislation and measures, none have been formally blocked. While this lack of public enforcement may indicate the Chinese government is cautious and wants to avoid making legal conflicts for multinational companies operating in China, the ambiguity has the potential to lead to disputes.
On March 8, 2025, the SPC highlighted its first civil case in its Work Report to the National People's Congress. In this case, a Chinese marine engineering company sued a foreign equipment supplier in the Nanjing Maritime Court because the foreign supplier suspended payments when the Chinese company was sanctioned by a third country. The Chinese court applied the Anti-Foreign Sanctions Lawand the parties settled after a mediation by the court, with the foreign supplier paying the outstanding contract price after receiving a license from the third country regulator.
The Regulations further boost private enforcement by encouraging law firms to represent Chinese parties in lawsuits against entities executing or assisting in the execution of foreign "discriminatory restrictive measures." Considering these recent developments, it is likely that multinational companies will face a greater risk of private litigation when they comply with U.S. and EU sanctions and export control measures and stop transacting with Chinese counterparties.
Three Key Takeaways
- The Regulations bolster China's stance against foreign sanctions with detailed implementation rules.
- The persistent ambiguity around "discriminatory restrictive measures" is a lower hurdle for Chinese parties pursuing damages in Chinese courts, which may raise further legal and operational risks for multinational companies.
- Multinational companies should closely review these changes to determine how they affect their commercial strategies and risk assessments.
