China’s New Law on Countering Foreign Sanctions

On 10 June 2021, the National People’s Congress Standing Committee of the People’s Republic of China passed the Law of the PRC on Countering Foreign Sanctions (the “Anti-Sanctions Law”). The Anti-Sanctions Law establishes a legal regime for the protection of Chinese individuals and entities from what are deemed to be discriminatory foreign sanctions and for implementing countermeasures against such sanctions.

Although the Anti-Sanctions Law was adopted on and is effective as of 10 June 2021, given the powers devolved to respective departments of the State Council thereunder, there may be clarifying guidance or regulations issued in due course on how it will be enforced or implemented.

We set out below, some of the key aspects of the Anti-Sanctions Law:

1. Implicated foreign sanctions: The Anti-Sanctions Law targets “discriminatory restrictive measures” imposed by foreign countries on Chinese individuals and entities that are deemed to have violated international law or basic principles of international relations and to have interfered in China’s domestic affairs.
2. Listed persons: State Council departments may place individuals or entities that are directly or indirectly involved in the formulation, decision-making, or implementation of such discriminatory restrictive measures on a “countermeasures list”.
3. Related Persons may be targeted: State Council departments may also take countermeasures against persons related to those listed on the countermeasures list, such as:
   1. close family members of listed individuals;
   2. the senior management or controllers of listed entities; or
   3. organisations in which listed individuals serve as senior management, of which they are controllers, or that are involved in the establishment or operation of listed individuals or entities.
4. Measures that may be taken: The countermeasures may include:
   1. denial/revocation of visas, denial of entry or deportation;
   2. freezing of assets within China;
   3. prohibition or restriction on transactions with listed persons within China; and
   4. any other “necessary” measures.
5. State Council departments’ powers: State Council departments’ listing decisions and use of countermeasures are final and appear not to be subject to administrative reconsideration or appeal. Broad rulemaking powers are further delegated to the State Council and its departments to provide for additional countermeasures against acts that are deemed to harm China’s sovereignty, security, or developmental interests.
6. Private right of action: There is a private right of action for Chinese individuals and entities to seek civil remedies in the Chinese courts from individuals or entities that are deemed to have implemented or assisted in implementing foreign “discriminatory restrictive measures” and thereby harmed the lawful rights and interests of Chinese individuals and entities.

As the Anti-Sanctions Law is rather broadly worded, it is not entirely clear at this stage as to the extent of how the provisions will be enforced or implemented. On the face of it, the law establishes a legal basis for retaliatory measures that China can take against sanctions and other measures from the US and other Western countries, and may well be initially aimed at foreign politicians who participate in the implementation of unilateral sanctions on China.

Given that the Anti-Sanctions Law seems to give wide-ranging powers to the relevant State Council departments, more specific guidance or regulations on how the law will be enforced or implemented may be issued in due course.

For now, the effect of the Anti-Sanctions Law is that foreign multinational companies with business or looking to do business in China should look to overlay geopolitical considerations into their decision-making processes.