Law on Countering Foreign Sanctions
July 21, 2021
The Law on Countering Foreign Sanctions has become effective as of June 10, 2021.
This new legislation covers counteracting sanctions or discriminatory restrictions targeting China [sic], Chinese nationals or Chinese organizations, which are imposed by foreign governmental authorities intervening China domestic affairs (the foreign sanctions). The prime target of this law is obviously US initiated laws, sanctions and embargoes.
The focus of this law is governmental relationship. A side effect could be seen on trade or business transactions, Part (c) of possible sanctions below in particular.
The new law grants certain powers to the State Council (which is similar to a cabinet of a typical European country) who may identify [foreign] individuals or organizations that (directly or indirectly) formulate, decide and implement the subject sanctions or discriminatory restrictions. Such individuals and organizations could be listed by the Chinese authorities.
Sanctions could be imposed by the State Council against the listed [foreign] individuals and organizations, which could also be extended to
(i) spouse, children and parents of a listed individual
(ii) senior management or controlling stake holder(s) of a listed organization
(iii) an organization in which a listed individual has a senior management role
(iv) organizations controlled, participated or run by a listed individual or organization
Sanctions could include
(a) denial or cancellation of China entry visa, denial of China entry or deportation from China;
(b) seizure or freezing of relevant assets in China;
(c) forbidding Chinese individuals and entities from transacting with the listed target(s); and
(d) other [discretional] sanctions.
- – The Ministry of Foreign Affairs is named as the authority who makes the list and public announcements on sanction decisions.
- – All China based entities and individuals must comply with and implement the China imposed sanctions. The State Council may impose penalties, and may restrict or forbid activities of the offenders.
- – NO organization or individual may implement foreign sanctions. Chinese nationals or organizations may sue before a China court for damages and specific performance when such foreign sanctions are so implemented.
Who should be concerned
US companies making [US] controlled substance or equipment, or dealing with [US] controlled or restricted technologies, and their affiliates in China. The possible sanction option (c) above is a real issue.
Foreign Entities Currently Facing China Sanctions
China currently puts three companies (i.e., Lockheed Martin, Boeing Defense and Raytheon) on its sanction list. The counter measures called by the Chinese authorities were “no business dealing with these three entities”. But this counter measure has no specifics on implementation and was done before this new law.
Since June 10, 2021 (the date on which the new law becomes effective), no foreign company or individual has been listed pursuant to the new law. When a sanction option (c) above is triggered in the future, a foreign owned business could be caught in between.
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