On 10 June 2021, the Standing Committee of the Countrywide People’s Congress reviewed and approved the Anti-International Sanctions Regulation (the AFSL), which took impact on the exact same working day. The AFSL was enacted inside two months and with out an prospect for public comment.

The AFSL gives the Chinese federal government authority to prohibit compliance by Chinese individuals, which include entities in China, with certain international sanctions regulations and export regulate restrictions that are considered to have a discriminatory affect on Chinese citizens or companies. It delivers governmental authorities a high degree of implementation flexibility according to precise situation and requires. The AFSL introduces new threat variables for the organization community, which presently faces difficulties in balancing compliance prerequisites beneath conflicting bodies of legislation. This notify highlights key takeaways and answers some critical queries arising from the new law. Some of these questions may well be clarified in implementation policies and steps that authorities are anticipated to situation in the around upcoming.


Numerous worldwide corporations have made handy applications and methods to comply with relevant sanctions actions, most notably U.S. and EU sanctions, these types of as frequent screening of customers from sanctions lists, screening of transactions for connection with embargoed nations, and compliance covenants for customers. Furthermore, in some situations, businesses have experienced to navigate treacherous waters involving competing sanctions regimes wherever compliance with a person established of legislation could signify violation of a different. This has especially been the case with the EU “blocking” measures that prohibit EU persons’ compliance with particular U.S. embargo measures.

With adoption of the AFSL, organizations and individuals in China and somewhere else must now target not only on compliance with the U.S. and EU sanctions, but also on countermeasures less than Chinese regulations. This presents a substantial obstacle in building a plan to ensure compliance with applicable sanctions regimes while not functioning afoul of Chinese legal guidelines.

Offered the deficiency of specificity in the AFSL, how the law will operate in practice is an open up question. If strictly enforced, firms in China, which include multinational organizations and their Chinese subsidiaries, may possibly deal with a important problem complying with potentially contradictory rules imposed by China and other overseas sanctions and export command actions to which they are also subject. If resolution of this conflict is not feasible, organizations may possibly have to select which regulator and enforcement authority provides a more substantial risk. This could have a significant influence on how multinational firms with operations in China condition their compliance policies and processes.

In reaction to this predicament, organizations could take into consideration employing diligence measures to monitor functions ahead of entering into or termination of a business enterprise romantic relationship, these kinds of as (i) a more thorough track record check on probable clients to assess sanction-linked hazards prior to setting up small business associations, or (ii) the selection of details about the background and explanations for sanctions from an current contracting get together and perseverance of no matter whether any discriminatory restrictive evaluate is involved just before the termination of the appropriate business enterprise marriage. Nonetheless, it is truly worth noting that simply refusing to do enterprise for the reason that of application of U.S. or other overseas sanctions could itself be deemed a violation beneath the AFSL. This is also how the EU and Canadian blocking statues work.

Though Chinese authorities have not yet issued assistance on what measures could be deemed discriminatory and thus result in application of the AFSL, a modern impression by the EU Advocate Standard in connection with a court docket claim filed by Lender Melli of Iran concerning the Deutsche Telekom’s termination of a contract in compliance with U.S. most important sanctions on Iran may well trace at how the AFSL will be enforced.1 The EU Advocate Common specially said that an EU enterprise in search of to terminate an usually legitimate deal with an Iranian entity matter to U.S. sanctions should satisfactorily display that it did so for motives other than compliance with U.S. steps. If this method is taken, it may perhaps be feasible to justify steps that seem to be in compliance with U.S. and EU sanctions by pointing to other legitimate explanations for using this kind of actions.

Whether this approach would be accepted by Chinese courts remains to be witnessed. In any party, contemplating the vital word “discriminatory” in the AFSL, it could be handy if a terminating get together can exhibit that it is performing pursuant to recognized interior procedures unrelated to compliance with U.S. or EU sanctions.

In addition to the foregoing safeguards, companies really should think about the adhering to additional compliance steps:

  • Revising present contract templates to mitigate the risk that the provisions in a agreement violate the AFSL right. For case in point, it is widespread to include a provision in contracts enabling a social gathering to terminate the contract in the function that the other get together is integrated on a U.S. sanctions list. As we outlined higher than, termination of an or else legitimate deal with a Chinese entity for the reason of compliance with U.S. sanctions could be subject matter to a lawsuit in China below the AFSL.

  • Consider a two-way somewhat than a one-way (i.e., the United States and the European Union only) screening of opportunity or existing buyers/suppliers from non-Chinese sanction lists and Chinese anti-sanction lists.

  • Create inside tips to explain and justify that business decisions are not undertaken in compliance with foreign sanctions when refusing to conclude contracts with specified Chinese businesses or folks, and display with coherent and systematic exercise, amongst other matters, that these professional conclusions do not violate the AFSL.

  • In the function of the termination of a agreement with a Chinese citizen or company, maintain information and evidence supporting the assert that the termination was unrelated to compliance with international discriminatory restrictive actions.

  • Look at engagement with the applicable departments of the State Council if the business can not implement countermeasures primarily based on the certain information of their company to mitigate possibility of becoming held liable below Article content 11 and 14 of the AFSL.

To have an understanding of the AFSL further more, beneath are our responses to four important thoughts about the new regulation.


Prior to the enactment of the AFSL, there were being a number of provisions about countermeasures in other Chinese regulations or administrative regulations, these as Post 48 of the Export Management Legislation and the Regulation on Unreliable Entity Listing and Measures to Block the Inappropriate Extraterritorial Software of Overseas Legal guidelines and Measures (Blocking Steps) released by the Ministry of Commerce of China (MOFCOM) in September 2020 and January 2021, respectively.

The AFSL gives a lawful framework to more enrich China’s countermeasure authorized regime from the subsequent views:

  • Statute. Unique from MOFCOM, the Standing Committee of the National People’s Congress workouts the legislative electricity in China. So, the AFSL has a better lawful standing than administrative policies enacted by MOFCOM. Also, the AFSL can apply to a lot more professional areas than the Export Manage Legislation does, which mainly focuses on intercontinental trade.

  • Authorization to Departments of Point out Council. The Ministry of Overseas Affairs used equally entry bans and trade bans in its sanctions from the United States, the European Union, the United Kingdom, and Canada in January and March of this calendar year. Strictly talking, nonetheless, there is no very clear legal basis for this kind of sanctions. Beneath the Legislative Law, countermeasures or administrative rules by themselves could be a problem in the absence of the basis of legal guidelines. The AFSL offers that legal foundation and authorizes the departments of Condition Council to consider countermeasures by establishing counter-sanction lists, implementing vacation ban and asset freeze measures and restricting transactions with detailed folks and businesses. This is one of the good reasons why the AFSL was handed on an accelerated basis, according to the explanations made available by the director of the Legal Affairs Committee of the Standing Committee of the National People’s Congress on 26 April 2021.

  • Authorized Basis of Long run Rules. The AFSL gives a capture-all clause (Write-up 13) that, in addition to the AFSL, relevant laws, administrative laws, and departmental rules, may possibly provide for the adoption of other vital countermeasures towards functions that endanger China’s sovereignty, security, and development pursuits. This supplies a legal basis for even further legislation and steps less than the AFSL, improving the toolkit of steps that Chinese authorities may use. For this rationale, the enactment of the AFSL is a much better tool in China’s legal toolkit, according to the director of the Authorized Affairs Committee of the Standing Committee of the National People’s Congress.3

  • Direct and Proactive Sanctions. The AFSL mostly emphasizes countermeasures against foreign sanctions. On the other hand, Posting 15 delivers the authorized basis for applying proactive sanctions exactly where any direct countermeasure or sanction is necessary in opposition to any foreign country, group, or person that implements, assists in, or supports any act endangering China’s nationwide sovereignty, safety, or growth passions. This could final result in sanctions being imposed on overseas entities or persons not linked to international sanctions or discriminatory restrictive actions.

Dilemma 2: WHAT ARE Covered International SANCTIONS?

Underneath Article 3, the key goal of the AFSL is the software of unilateral international sanctions. In other phrases, the AFSL is targeting specific unilateral state actions rather than overseas sanctions imposed under intercontinental legislation. In actuality, the Ministry of Overseas Affairs concerns circulars from time to time to apply sanction lists according to resolutions of the United Nations Security Council.4

The AFSL authorizes the pertinent departments of the Condition Council to involve folks and businesses that are immediately or indirectly concerned in the formulation, determination-earning, or imposition of discriminatory restrictive steps as established forth in Short article 3 of the AFSL in an anti-sanction checklist. The AFSL, even so, does not define “discriminatory restrictive measures.”

Until the scope of “discriminatory restrictive measures” is greater understood by true application and implementation of the AFSL, the only clue we may perhaps glance to in buy to fully grasp the scope of “discriminatory restrictive measures” from China is Article 3.

Short article 3 provides for the subsequent triggering function(s) of China’s countermeasures:

“Where a overseas nation,

  • violates global law and simple norms of intercontinental relations,

  • incorporates or suppresses China on different pretexts or in accordance with its have legislation,

  • adopts discriminatory restrictive steps in opposition to any Chinese citizen or organization, and/or

  • meddles in China’s inside affairs.”

Practically speaking, if a sanction or restrictive measure of a international nation does not aim on China precisely, it seems as if such a international sanction is not discriminatory. As a result, for instance, an export handle measure that applies equally to folks from all nations around the world, this sort of as a ban on the export and re-export of chemical weapons precursors, would not be considered discriminatory if applied to a Chinese organization that breaches the measure.

Concern 3: WHO ARE Men and women AND Businesses Covered?

The AFSL prohibits the implementation of foreign discriminatory restrictive actions in opposition to Chinese citizens and corporations. For this intent, people protected by the AFSL are twofold:

Report 4 mostly targets foreign lawmakers, government officers, and businesses accountable for formulation, final decision-creating, and/or imposition of discriminatory restrictive steps and authorizes the pertinent departments of the State Council to contain all those men and women and entities in an anti-sanction record. Write-up 5 extends the scope of individuals who are subject matter to countermeasures to affiliates of folks who are included in the anti-sanction checklist.

For individuals and companies who put into action or assist in the implementation of international discriminatory restrictive steps in opposition to Chinese citizens or organizations, Write-up 12 allows Chinese citizens or organizations to initiate lawsuits in Chinese courts for injunctive aid and damages. Commonly, the men and women and companies included are Chinese citizens’ or organizations’ suppliers, consumers, or organization associates who are in compliance with overseas sanctions.

Posting 11 of the AFSL additional needs folks and companies within just Chinese territory to apply the countermeasures imposed less than the AFSL, and Short article 14 gives that any person or corporation that fails to implement or cooperate with the implementation of Chinese countermeasures will be held legally liable. In conditions of the scope of persons who ought to put into practice Chinese countermeasures, the distinction involving Write-up 11 and Report 14 is topic to clarification.

The scope of persons included by the AFSL is vague. For case in point, there is no definition of folks “indirectly included in” formulation, choice-making, or imposition of discriminatory restrictive measures below Posting 4. This could go away application of the provision open up to a huge range of businesses and folks who cooperate in the development or imposition of restrictive actions.

While it continues to be to be seen how the Chinese government will carry out the legislation, the AFSL grants the departments of the State Council extensive discretion when they carry out the AFSL in this regard. This could have a chilling effect on persons and companies, even together with in-residence or exterior counsel to multinationals in China when they suggest on compliance with U.S. sanctions.

Dilemma 4: WHAT ARE THE Cures TO Persons Lined Beneath THE AFSL?

As the head of the Lawful Affairs Committee of the Standing Committee of the National People’s Congress discussed to reporters, Chinese countermeasures taken below Article content 4 to 6 are condition sovereign actions.As such, the pertinent choices manufactured by departments of the Condition Council are final conclusions. This is consistent with Posting 13 of the Administrative Treatment Law, which delivers that point out steps involving countrywide defense or diplomacy are not subject matter to judicial critique.

Furthermore, in contrast to the Blocking Measures, the AFSL does not deliver for a system to ask for an exemption application of the legislation.

In the function of an faulty listing choice or countermeasure, the solution under the AFSL will be to converse with the applicable departments of the State Council and search for their consents to suspend, modify, or terminate the appropriate listing selection or countermeasures underneath Posting 8 of the AFSL. 


There will be a lot of more important developments as Chinese authorities further more make clear and, ultimately, employ provisions of the AFSL. 

See Opinion of Advocate Basic Hogan (May well 12, 2021), https://curia.europa.eu/juris/doc/document.jsf?text=&docid=241168&pageIndex=&doclang=EN&mode=lst&dir=&occ=to start with&component=1&cid=6093084

2 Note to the Anti-Foreign Sanctions Regulation of the People’s Republic of China (Draft) (Apr. 26, 2021), http://www.npc.gov.cn/npc/c30834/202106/99804919249244e593383c9da4e39ddf.shtml

3 Id.

4 Notification of the Implementation of Security Council Resolutions, https://www.fmprc.gov.cn/net/wjb_673085/zfxxgk_674865/gknrlb/jytz/.

5 The Head of the Lawful Affairs Committee of the Standing Committee of the Countrywide People’s Congress Responses Reporters’ Concerns on the Anti-International Sanctions Regulation, http://www.xinhuanet.com/politics/2021-06/10/c_1127551967.htm.