China Enacts Blocking Rules on Application of Foreign Laws

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On 9 January 2021, the Ministry of Commerce promulgated the Rules on Counteracting Unjustified Extraterritorial Application of Foreign Laws and Other Measuresto block its companies and citizens from having to follow unjustified foreign laws and measures, in its latest riposte to US restrictions on businesses like ByteDance Ltd.s TikTok.

There are 16 articles in total. The Rules shall be effective as of the date of the promulgation and allow authorities to ban the imposition of other jurisdictions laws and other measures on Chinese entities when it deems them inappropriate, which will be enforceable in China but difficult to use for activities outside of the country.

The Rules apply to situations where the extraterritorial application of foreign laws and other measures in violation of international laws and basic principles of international relations unjustifiably prohibits or restricts Chinese citizens, legal persons, or other organizations from engaging in normal economic, trade and related activities with a third country or region or its citizens, legal persons or other organizations.

Article 4 provides that China will establish interagency working mechanisms led by the competent department of commerce of the State Council to take charge of counteracting unjustified extra-territorial application of foreign laws and other measures.

The Rules also stipulate measures including information report, the issuance of prohibition orders and judicial remedies, for the purpose of safeguarding national sovereignty, security and development interests, as well as protecting the legitimate rights and interests of Chinese citizens, legal persons and other organizations.

The following factors will be considered when evaluating and confirming the improper extraterritorial application of foreign laws and other measures: (i) whether or not there is a violation of international laws and basic principles of international relations; (ii) possible impact on the sovereignty, security and development interests of China; (iii) possible impact on the legitimate rights and interests of Chinese citizens, legal persons or other organizations; and (iv) any other factor that shall be taken into consideration.

Where a party complies with or a judgment or ruling is made in accordance with a foreign law or measure within the scope of an injunction order issued by the competent department of commerce of the State Council, resulting in infringement upon the legitimate rights and interests of a Chinese citizen, legal person or other organization, the Chinese citizen, legal person or other organization may file a lawsuit in China to claim for compensating losses.

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