On June 10, 2021, the Standing Committee of the National People’s Congress of China enacted the Anti-foreign Sanctions Law (“AFSL”), which came into effect as of the date of enactment. As China’s latest legislative countermeasure against economic sanctions of the U.S., E.U., U.K, and other jurisdictions, AFSL will have significant impact on Chinese subsidiaries and branches of foreign enterprises, as well as foreign persons (entities and individuals) doing business in China or with Chinese individuals and companies.

I. Overview of the AFSL

A. Who will be listed in the Countermeasures List?

The relevant departments of the State Council may decide to include in the Countermeasures List (the “List”) the individuals and organizations that have directly or indirectly participated in the formulation, decision on or implementation of discriminatory restrictive measures of foreign governments.

In addition, the relating parties of persons in the List may also face countermeasures, including:

a) The spouse and lineal relatives of the individuals included in the List;
b) Senior executives or actual controllers of the organizations included in the List;
c) Organizations that have individuals included in the List acting as senior executives; and
d) Organizations actually controlled by individuals or organizations that are included in the List or have participated in the establishment and operation thereof.

B. What are the countermeasures?

The relevant departments of the State Council of China may, depending on the actual situation, take one or more of the following measures against persons included in the List:
a) Denial of visa issuance, denial of entry, deregistration of visa or deportation;
b) Seizure, distraining or freezing of movable property, immovable property and other types of property within the territory of China;
c) Prohibiting or restricting the organizations or individuals within the territory of China from conducting relevant transactions, cooperation or other activities with them; and
d) Other necessary measures.

C. What are the legal consequences for violating the AFSL?

The organizations and individuals within the territory of China shall carry out the countermeasures taken by the relevant departments of the State Council. Any organization or individual failing to do so will be punished by the relevant departments of the State Council in accordance with the law, and such organization or individual will be restricted or prohibited from engaging in the relevant activities.
Where any organization or individual implements or assists in implementing the discriminatory restrictive measures taken by any foreign state against Chinese citizens or organizations and infringes upon the legitimate rights and interests of any citizen or organization of China, the Chinese citizen or organization may bring a lawsuit, seeking cessation of the infringement and compensation for the losses.
Where any organization or individual fails to implement or cooperate in implementing the countermeasures, it/he will be subject to legal liability in accordance with the law.

II. The Impact of the AFSL on Foreign Companies

A. Foreign companies participating in sanctions against China might endure countermeasures imposed by the Chinese government.

Foreign companies directly or indirectly involved in the formulation, decision on, or implementation of discriminatory sanctions against Chinese persons may be added to the List. The main effects on foreign companies on the List will be as follows:

Firstly, senior executives or actual controllers of foreign companies on the List may not be allowed to enter China for business trips to perform their duties. Secondly, assets of foreign companies on the List and foreign companies with individuals on the List acting as their senior executives or actual controllers will likely be blocked. Thirdly, foreign companies on the List and foreign companies with individuals on the List acting as their senior executives or actual controllers might be prohibited from dealing with individuals and entities in China.

B. Foreign companies might be caught in a compliance dilemma between AFSL and foreign sanctions.
After the implementation of the AFSL, foreign companies are subject to both the obligation to comply with discriminatory sanctions imposed by other countries, and the requirement not to enforce foreign discriminatory sanctions and to enforce China’s countermeasures under the AFSL. Complying with the discriminatory sanctions against China may violate the AFSL, while complying with the AFSL may violate the discriminatory sanction regulations of other countries as well. This will probably put foreign companies in a compliance dilemma and substantially increase their compliance difficulties and costs.

III. Suggestions for Foreign Companies

A. Pay Close Attention to the Interpretation and Application of the AFSL

The AFSL contains only 16 articles, leaving substantial wriggle room for further interpretation and clarification. The Chinese government may subsequently promulgate implementary guidelines and/or FAQs of the AFSL, and initiate enforcement actions against persons violating the AFSL. We suggest foreign enterprises to pay close attention to the latest development as well as relevant cases of the AFSL to better grasp its compliance key points.

B. Develop or Adjust Compliance Programs in Response to the AFSL and other Chinese Anti-Sanction Legislations

We suggest foreign companies doing business in China or with Chinese persons to raise awareness of complying with the AFSL and other Chinese anti-sanction legislations including but not limited to Measures for Blocking Improper Extraterritorial Application of Foreign Laws and Measures and Provisions on the List of Unreliable Entities, and implement them as part of global trade compliance policies. Foreign companies may adjust their compliance programs to better satisfy the compliance requirements of the AFSL, such as increasing the screening of entities on the List in course of daily operation and providing relevant compliance training sessions for their employees.

C. Strengthen Risk Assessment and Develop Contingency Plans

In course of doing business in China, foreign companies shall comply with both the laws of foreign countries and those of China. However, conflicts between Chinese and foreign laws may lead to significant losses such as termination of major projects and loss of investment profits in China. Therefore, we suggest that foreign companies strengthen the risk assessment of major projects before undertaking them and maintain open communication channels with Chinese and foreign authorities. We also suggest foreign enterprises to develop contingency plans responding to potential crises resulted from the abovementioned compliance conflicts.


Xiangwen Liu
Senior Partner, Head of Regulatory Compliance
Zhong Lun Law Firm

Mr. Xiangwen Liu is a senior partner at Zhong Lun Law Firm and the Head of the firm’s Regulatory Compliance Department. Mr. Liu concentrates his practice on litigation & arbitration and regulatory compliance.

Mr. Liu has handled more than one thousand domestic/international dispute resolution cases, including Danone v. Wahaha, Vanke v. Baoneng Group, and Sany vs Zoomlion. Mr. Liu has helped clients to respond to legal proceedings before all levels of courts in China and courts in dozens of other jurisdictions including the United States, Germany, Canada, Singapore, BVI, and Republic of Congo. He also has extensive experience representing clients in prominent arbitral tribunals including the Arbitration Institute of the Stockholm Chamber of Commerce, the Hong Kong International Arbitration Center, the International Court of Arbitration of the International Chamber of Commerce, the American Arbitration Association, and the China International Economic and Trade Arbitration Commission.

Mr. Liu is very experienced in regulatory compliance and as the leading partner, has developed compliance programs for more than 30 Chinese central enterprises, large state-owned enterprises, private enterprises and multi-national enterprises, including Sinochem Holdings, State Development and Investment Corporation, China Certification & Inspection Group, State Power Investment Corporation, China Minmetals Corporation, Aviation Industry Corporation of China, China Three Gorges Corporation, Mengniu Diary.