Yesterday, China published the Provisions on Countering Unjust Extraterritorial Application of Foreign Laws, another piece of legislation in the growing network of China's sanctions and countermeasures to foreign actions. The new legislation creates a legal framework for addressing the extraterritorial application of foreign measures, effectively bridging the defensive tools such as a 2021 blocking rule and offensive tools such as the Anti-Foreign Sanctions Law and the implementing rules.
The Provisions (中华人民共和国反外国不当域外管辖条例, link in Chinese), represent a significant consolidation of China’s legal toolkit against unjust foreign extraterritorial jurisdiction and measures, building upon the foundations of the Anti-Foreign Sanctions Law, National Security Law, and Foreign Relations Law.
Rationale behind the new rules
An official from the Ministry of Justice underscored the planning of the fourth plenum of the 20th Central Committee of the CCP regarding anti-sanctions, anti-interferences, and anti-long-arm jurisdictions.
It is "necessary to unequivocally declare, through legislative means, China's principled stance that it will not accept unjust extraterritorial jurisdiction imposed by foreign entities," said the official.
The Provisions "reflect an urgent need to counter the hegemonism and power politics practiced by some Western nations, to protect the interests of both the nation and its people, and to effectively enhance China's legal capacity to deal with external risks and challenges," the official added.
Main principles
The Provisions are not about rejecting extraterritorial jurisdictions per se. In fact, they acknowledge that the "Chinese government has the right to exercise extraterritorial jurisdiction over acts that have an appropriate connection with China," based on international treaties that China has concluded or joined, or the principle of reciprocity (Article 4.1).
The regulation primarily targets unjust and unlawful foreign extraterritorial applications.
When there is an overlap, for instance, if China and a foreign state both assert jurisdiction over the same conduct, "the parties may resolve the issue through treaties, diplomacy, or consultations between competent authorities, on the basis of international law and basic norms of international relations (Article 4.2)."
Unjust foreign measures
The cornerstone of the regulation is that the Chinese government has the right to respond "where a foreign state, in violation of international law and the basic norms governing international relations, implements unjust extraterritorial measures that impair China's national sovereignty, security, and development interests, or infringe upon the lawful rights and interests of Chinese citizens and organizations." (Article 3.2)
Notably, the Provisions entail a comprehensive identification-blocking-countermeasure cycle for unjust foreign extraterritorial measures.
Article 6 sets forth specific rules on identifying unjust extraterritorial application of foreign laws and measures, prohibition on recognition and enforcement, and a narrow exemption system.
To identify unjust extraterritorial measures, the Provisions outline four factors. These include (1) whether the measures are contrary to international law and basic norms of international relations; (2) whether they affect China's sovereignty, security and development interests and its citizen's legal rights and interests, and (3) whether there is a "proper nexus" between the conduct being effected and the foreign state imposing the measures.
Countermeasures and the new entity list
After investigations and assessment, the Provisions authorize the government to take countermeasures and impose sanctions on entities involved.
For foreign nations and governments imposing unjust extraterritorial jurisdiction and measures, the Chinese government can take countermeasures, ranging from actions in diplomacy and foreign affairs, to restrictions on trade, investment, international cooperation, and foreign aid (Article 7).
For the first time, the Provisions create a "Malicious Entity List," which applies to entities that "promote the implementation of or participate in implementing" ("推动实施或参与实施") such foreign measures. Listed entities could face penalties including fines, asset freezing, blocking entries, ban or restrictions on trade, investment, and transactions including data transfers (Article 8).
These penalties may also apply to entities controlled or operated by the listed parties.
There is an exit for sanctioned entities, as they can apply for suspension and revocation of the measures. The government will then review the applications and publish its decisions (Article 9).
Exemptions from countermeasures may also be granted if approved by the government (Article 11).
Blocking Orders
Once a foreign measure is identified as unjust, anyone who is suspected of complying with ("执行") the measures may face investigations (Article 12) or be summoned by the government (Article 13).
The government may also issue a formal "Blocking Order" that prohibits parties from complying with the foreign measures.
Chinese citizens and organizations can seek legal redress if they suffer damages from such compliance with the foreign measures. The affected party can sue for injunctive relief and compensations in Chinese courts (Article 14).
Penalties
Any violation or circumvention of China's countermeasures or violation of its Blocking Orders may lead to several potential penalties, including limitations on public procurement, public bidding, trade, data transaction, travel bans, and fines (Article 17) or criminal charges (Article 18).
Expansion from the 2021 Rules
While the new Provisions share some overlaps with MOFCOM's Rules on Unjustified Extra-Territorial Application of Foreign Legislation and Measures issued in 2021, they represent a significant legislative expansion: They transform the departmental rules into a high-level administrative framework with expanded coverage and increased enforcement powers.
Institutional arrangement: The Provisions create a new working mechanism under the State Council. By shifting some authorities to the Ministry of Justice, such as identifying unjust measures, granting exemptions, and issuing Blocking Orders, the new framework signals a shift from a trade-administration model to a state-security and whole-of-government model.
Expanded scope: The Provisions encompass a broad range of unjust extraterritorial measures of foreign states, capturing both primary and secondary sanctions and non-sanction-related measures, while the 2021 Rules arguably mainly target the application of secondary sanctions.
Proactive enforcement and countermeasures: Compared to the 2021 Rule, the Provisions grant the government a more proactive role in identifying foreign measures, including through investigations and external consultations. The available countermeasures are also diversified, extending beyond trade into the fields of diplomatic, international cooperation, and foreign aid fields.