China Enacts Law to Counter Foreign Sanctions

On June 10, 2021, the Standing Committee of China's National People's Congress passed the Anti-Sanctions Law, which immediately came into effect. China has previously enacted measures to address foreign sanctions, such as the Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Laws and Other Measures (the "Blocking Rules"), discussed in our Jones Day Commentary, "China Releases Rules to Address Extra-Territorial Applications of Foreign Laws," and the Unreliable Entities List Provisions. The Anti-Sanctions Law represents a significant expansion of China's "legal toolbox" to address sanctions and other trade restrictions imposed by other countries.

Certain aspects of the new law's scope and application currently remain uncertain. Nevertheless, as discussed below, the Anti-Sanctions Law provides for several important countermeasures that will undoubtedly complicate the compliance landscape for multinational companies operating in China.

Countermeasure List and Restrictive Measures

As an initial matter, the Anti-Sanctions Law introduces a new sanctions list named the Countermeasure List ("CL"). The Ministry of Foreign Affairs and other relevant ministries of the State Council (the "competent ministries") have the discretion to identify on the new list any foreign individuals and organizations that are involved in making, deciding, and implementing discriminatory restrictive measures of foreign countries. 

Importantly, the Anti-Sanctions Law further empowers the competent ministries to designate the following individuals and organizations related to those already identified on the CL:  

• The spouse and direct lineal family members of the individuals on the CL; 
• The senior officers or persons controlling the organizations on the CL; 
• The organizations in which the listed individuals serve as senior officers; and
• Organizations that the listed individuals or organizations operate and organizations that have been established by listed individuals or organizations.  

Individuals and organizations designated are subject to one or more of the following measures:

• Refusal to issue visas, denial of entry, cancellation of visas or deportation;
• Seizure and freezing of property within the territory of China; 
• Prohibitions or restrictions on commercial transactions, cooperation or other activities with organizations and individuals within the territory of China; and 
• Other necessary measures. 

According to the Anti-Sanctions Law, the decisions to identify individuals and organizations and impose restrictive measures are final—meaning the decisions are not subject to administrative reconsideration or judicial review.

Blocking Discriminatory Restrictive Measures 

In addition to the new sanctions list, Article 12 of the Anti-Sanctions Law also sets a broad prohibition on "implementing or assisting in the implementation of discriminatory restrictive measures taken by foreign countries against Chinese citizens and organizations."

That prohibition is broadly similar to the prohibitions set out in the Blocking Rules issued by China's Ministry of Commerce ("MOFCOM") in January 2021. While it remains to be seen how the Blocking Rules and Article 12 of the Anti-Sanctions Law will interact with each other in practice, they appear to have divergent and complementary targets. MOFCOM's Blocking Rules appear to mainly target any action under U.S. secondary sanctions that "unjustifiably prohibits or restricts the citizens, legal persons or other organizations of China from engaging in normal economic, trade and related activities with a third country (or region) or its citizens, legal persons or other organizations." In contrast, although "foreign discriminatory restrictive measures" are not defined, Article 12 of the Anti-Sanctions Law appears to be intended to block foreign legislation and measures directed against Chinese persons—for example, U.S. primarysanctions and similar restrictive measures. 

Under MOFCOM's Blocking Rules, a joint committee chaired by MOFCOM is empowered to identify and block relevant foreign laws and measures by issuing a prohibition order (although MOFCOM has not done so to date). The new Anti-Sanctions Law, however, does not stipulate the procedure or standard that will be used to determine whether foreign legislation or measures will be considered discriminatory restrictions against Chinese persons. As such, actual application of Article 12 of the Anti-Sanctions Law's prohibition remains, as yet, uncertain.

Compliance and Private Right of Action

The Anti-Sanctions Law also imposes broad compliance obligations. First, "[o]rganizations and individuals in the territory of China" are required to "implement the counter-sanction measures adopted by the relevant ministries of the State Council." Persons failing to do so will be "punish[ed]…according to the law and restrict[ed] or prohibit[ed]…from carrying out relevant activities." Second, as discussed, according to the new blocking mechanism of Article 12 of the Anti-Sanctions Law, "[n]o organization or individual may implement or assist in the implementation of discriminatory restrictive measures taken by foreign countries against Chinese citizens and organizations."

Importantly, when an organization or individual continues to implement a blocked foreign discriminatory restrictive measure, the Anti-Sanctions Law allows Chinese persons to "institute a lawsuit with the people's court in accordance with the law, requesting the said organization or individual to cease the infringement and compensate for the losses."

Conclusion