On 10 June 2021, the Standing Committee of the National People’s Congress of the PRC enacted the Anti-Foreign Sanctions Law (AFSL), which took effect on the same date.

The AFSL follows previous measures taken by the PRC government, including the sanctions announced by the PRC Ministry of Foreign Affairs (MOFA) against foreign individuals and organisations, the Unreliable Entity List, and the sanctions blocking statute issued in January this year by the PRC Ministry of Commerce (MOFCOM). The AFSL confirms the legislative basis for these measures.

Key observations

The AFSL is a short piece of legislation consisting of 16 articles. As the provisions of the AFSL are very high-level, detailed implementation rules may be released subsequently.

The AFSL appears primarily to target sanctions imposed by foreign states on PRC government officials, although the law also provides flexibility for a much broader scope of application. Notably, the law provides that the PRC government may issue an anti-foreign sanctions Counter List, and impose countermeasures on individuals and organisations included in the Counter List and their related persons.

The AFSL itself does not include such a list and thus does not have an immediate impact. However, depending on the scope of the eventual list and the countermeasures taken in future, compliance obligations may be far-reaching. Although not confirmed explicitly under the AFSL, there is a likelihood that foreign entities are also required to comply with the countermeasures announced by the PRC government under the AFSL and, additionally, to not implement or assist in the implementation of any “discriminatory restrictive measures” taken by a foreign state against Chinese citizens and organisations.

For non-compliance with the obligation not to implement or assist in the implementation of foreign measures, the AFSL does not provide administrative liabilities but civil liabilities actionable in the PRC courts.

When could countermeasures be taken under the AFSL?

Article 3(2) of the AFSL provides that China may take anti-sanctions measures, where a foreign state “violates international laws and basic norms of international relations, contains or suppresses China using various pretexts or based on their own national laws, takes discriminatory restrictive measures against Chinese citizens and organisations, interferes with China’s internal affairs.”

It is unclear from the text whether all four limbs are required to be satisfied or whether satisfaction of one or more limbs is sufficient for this article to apply. Either way, given the broad formulation of the conditions, Article 3(2) may potentially apply to a wide range of situations. From the provisions in Article 4, however, it appears that the current focus of the AFSL is “discriminatory restrictive measures against Chinese citizens and organisations” (see further below).

The AFSL, in Article 15, further provides that where foreign states, organisations or individuals “implement, assist or support acts that endanger China’s sovereignty, security and development interests,” anti-sanctions measures may be taken as necessary, by reference to the AFSL. Article 13 provides that for acts endangering China’s sovereignty, security and development interests, other necessary countermeasures may be adopted in accordance with other laws and regulations in addition to the AFSL. As the AFSL does not contain other specific provisions on acts endangering China’s sovereignty, security and development interests, Articles 15 and 13 appear to provide flexibility for more expansive application of the AFSL.

Who will be targeted by AFSL countermeasures?

Pursuant to Article 4 of the AFSL, relevant departments of the PRC State Council may create an anti-foreign sanctions Counter List, to include individuals and organisations who are “directly or indirectly involved in formulating, deciding or implementing the discriminatory restrictive measures as provided in Article 3.”

No definition is provided for the term “discriminatory restrictive measures.” However, from the Q&As released by the NPC Standing Committee, it appears the law is primarily intended to counter “unilateral sanctions” imposed by foreign states on PRC government officials “using topics such as Xinjiang, Tibet, Hong Kong, Taiwan, South China Sea and Covid-19 as pretexts.”

Article 5 of the AFSL provides that countermeasures may also be taken against individuals and organisations related to those on the Counter List. Related persons may include:

  • spouses and direct lineal family members of individuals on the Counter List;
  • senior managers or actual controllers of the organisations on the Counter List;
  • organisations in which the individuals on the Counter List serve as senior managers; or
  • organisations that individuals or organisations on the Counter List actually control or participated in the establishment and operation thereof.

What countermeasures are available under AFSL?

Pursuant to Article 6 of the AFSL, relevant departments of the PRC State Council may decide to impose countermeasures against any listed person or related person. The potential countermeasures include :

  • denial of visas, denial of entry, cancellation of visas or deportation;
  • sealing up, seizing and/or freezing movable and immovable property and other types of property within China;
  • prohibiting or restricting organisations and individuals within China from conducting transactions, cooperation or other activities withrestricted persons; and
  • any “other necessary measures.”

Which government entities have the authority to make decisions regarding  countermeasures?

The AFSL provides that the “relevant departments of the State Council” have the authority to decide, suspend, alter or cancel any countermeasures. However, the law does not specify which departments have such authority. In practice, MOFA and MOFCOM will likely retain important roles in the response to foreign sanctions.

Article 7 provides that the decisions made by the relevant departments of the State Council in accordance with Articles 4 to 6 of the AFSL shall be final.

According to Article 9, MOFA or other departments of the PRC State Council may publish the Counter List and the determination, suspension, alteration or cancellation of any countermeasures by issuing orders.

Who is required to comply with the AFSL and what are the consequences for non-compliance?

It appears that both domestic and overseas individuals and organisations are required to comply with the AFSL, although non-compliance implications for domestic and overseas persons may be different:

  • Article 11 provides that “organisations and individuals within the territory of the PRC (emphasis added), are required to comply with the countermeasures announced by the relevant departments of the State Council. If any party violates this provision, the relevant departments of the State Council are entitled to take measures, including “to restrict or to prohibit them from engaging in relevant activities.” No definition is given as to the term “relevant activities.”
  • Article 14 provides that if any organisations and individuals” (emphasis added) fail to implement or cooperate in the implementation of the countermeasures taken under the AFSL, they may be “investigated for legal liabilities in accordance with the law.” There is no further clarification as to what such legal liabilities might be. Although not expressly confirmed in this article, the wording appears to suggest that it may potentially apply to overseas organisations and individuals.

Furthermore, Article 12 of the ASFL provides that any organisations and individuals” (emphasis added) should not implement or assist in the implementation of discriminatory restrictive measures taken by foreign states against Chinese citizens or organisations, suggesting (as with Article 14) that it may potentially apply to both domestic and overseas organisations and individuals. Organisations or individuals who violate this provision and infringe legitimate interests of Chinese citizens and organisations, may be subject to legal proceedings in the Chinese people’s courts to request cessation of infringement and seek compensation for losses.

Although both Articles 12 and 14 might apply to overseas individuals and organisations, Article 14 may have a relatively limited impact as it regards implementation of countermeasures, which according to Article 6 will be applicable primarily within the PRC. In comparison, Article 12 regards non-implementation of foreign sanctions, which may have a more far-reaching impact. That being said, legal liabilities under Article 12 appear to be of a civil nature only and must be pursued through PRC court proceedings. It is less likely that overseas parties may face such proceedings and, even if they do, the decisions may not ultimately be enforced in their home jurisdictions.

Kyle Wombolt
Kyle Wombolt
Global Head, Corporate Crime & Investigations, Hong Kong
+852 2101 4005
Jeremy Birch
Jeremy Birch
Partner, Hong Kong
+852 2101 4195
Weina Ye
Weina Ye
International Partner, HSF Kewei
+86 21 2322 2132