China Strengthens Its Legal Arsenal Against Foreign Sanctions Through Civil Litigation Pathways
China has taken significant steps to bolster its defenses against what it views as discriminatory foreign sanctions and improper extraterritorial measures. Recent implementing rules have clarified and expanded opportunities for Chinese citizens and organizations to pursue civil remedies in domestic courts when their rights are affected by compliance with foreign restrictions.
The developments build on the foundational 2021 legislation while introducing detailed procedures for private enforcement. This shift places greater emphasis on individual and corporate plaintiffs bringing claims directly against entities that implement or assist in foreign measures deemed harmful to Chinese interests.
Foundations of the Framework: The 2021 Countering Foreign Sanctions Law
In June 2021, the Standing Committee of the National People's Congress adopted the Law of the People's Republic of China on Countering Foreign Sanctions. This statute established mechanisms for the government to impose countermeasures on foreign individuals and entities involved in sanctions targeting China. It also included a key provision allowing affected Chinese parties to seek judicial relief.
Article 12 of the law specifically permits Chinese citizens and organizations to file lawsuits in people's courts against any organization or individual that enforces or assists in enforcing foreign discriminatory restrictive measures, requesting cessation of the infringement and compensation for losses. The law defines the scope broadly to cover actions that infringe upon lawful rights and interests.
2025 Implementing Regulations Provide Operational Clarity
In March 2025, the State Council issued the Regulations on Implementation of the Anti-Foreign Sanctions Law, effective immediately upon promulgation. These 22 articles detail how the 2021 law operates in practice, including procedures for designating entities on the countermeasure list, specifying the types of assets subject to seizure or freezing, and outlining coordination among State Council departments.
The regulations emphasize private enforcement by encouraging Chinese parties to bring civil actions and by urging law firms to represent plaintiffs in such cases. They refine rules for suspending, modifying, or canceling countermeasures while clarifying the breadth of "other necessary measures" available to authorities.
April 2026 Regulations Target Improper Extraterritorial Jurisdiction
On April 7, 2026, the State Council promulgated the Regulations on Countering Improper Extraterritorial Jurisdiction by Foreign States. These rules create a formal process for identifying foreign legislation or enforcement actions that improperly extend jurisdiction over China-related activities.
The Ministry of Justice takes a leading role in assessing whether measures constitute improper extraterritorial jurisdiction, considering factors such as compliance with international law, jurisdictional nexus, and impacts on China's sovereignty, security, or development interests. Affected Chinese entities can seek civil remedies including injunctive relief and damages from parties complying with such measures.
Landmark Court Cases Demonstrate Practical Application
The Supreme People's Court highlighted the first reported civil case under the framework in its 2025 work report. A Chinese marine engineering company sued a foreign equipment supplier in the Nanjing Maritime Court after the supplier withheld payment citing third-country sanctions on the Chinese firm. The court accepted the case under the anti-sanctions provisions, granted asset preservation orders on a vessel, and facilitated a mediated settlement resulting in full payment within 39 days.
More recently, a Chinese technology company initiated proceedings seeking approximately US$1.1 billion in damages against Netherlands-based entities, alleging implementation of discriminatory measures in violation of the law. These cases illustrate how courts are applying the provisions to contract disputes involving sanctions compliance.
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Mechanics of Civil Suits Under the Legislation
Chinese plaintiffs can initiate tort-style claims in people's courts when foreign compliance actions cause harm. Courts have jurisdiction even where contracts contain arbitration clauses if the claim is framed around infringement of rights under the anti-sanctions framework rather than pure contractual breach.
Remedies typically include orders to cease the infringing conduct and monetary compensation for losses. Pre-trial asset preservation measures, such as vessel arrests in maritime cases, provide leverage for plaintiffs. The process encourages mediation, as seen in the rapid resolution of the Nanjing matter.
Implications for Multinational Companies and Trade Partners
Entities operating in China or maintaining commercial relationships with Chinese counterparties face heightened exposure. Compliance with foreign sanctions or export controls may no longer serve as a straightforward defense in Chinese courts if the conduct is deemed to infringe on protected rights.
Companies must navigate conflicting obligations across jurisdictions. Contractual provisions addressing sanctions, termination rights, and governing law require careful review to account for potential Chinese court oversight. Supply chain decisions, investment strategies, and data transfers now carry additional litigation risk.
Government Support and Institutional Coordination
Authorities including the Ministry of Foreign Affairs, Ministry of Commerce, and Ministry of Justice coordinate on designations and enforcement. The Supreme People's Court plays a key role in interpreting and publicizing cases that reinforce the framework.
The regulations encourage legal professionals to support plaintiffs, signaling institutional backing for private actions. Government guidance and support mechanisms aim to facilitate access to remedies for affected parties.
Broader Context in China's Legal and Economic Strategy
These measures form part of a larger toolkit that includes export controls, blocking rules for unjustified extraterritorial application of foreign laws, and industrial supply chain security provisions. They respond to perceived long-arm jurisdiction and discriminatory practices while protecting national interests.
The emphasis on civil litigation complements administrative countermeasures, creating a dual-track system that empowers both state action and private initiative. This approach aligns with broader efforts to strengthen legal resilience in international economic relations.
Challenges, Risks, and Practical Considerations for Stakeholders
Ambiguities remain regarding the precise definition of "discriminatory restrictive measures" or "improper extraterritorial jurisdiction," potentially leading to case-by-case determinations. Multinational firms must conduct enhanced due diligence on counterparties and monitor evolving designations.
Contractual carve-outs, internal compliance protocols, and contingency planning become essential. Parties may need to balance obligations under foreign laws with risks of liability in Chinese courts, prompting reviews of dispute resolution clauses and insurance coverage.
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Outlook for Continued Development and Enforcement
With implementing regulations now in place and precedent cases emerging, further civil actions appear likely. Authorities continue to refine procedures and expand the scope of covered measures.
Stakeholders should anticipate increased litigation activity and evolving interpretations from the courts. Ongoing monitoring of official announcements from the State Council, Ministry of Justice, and Supreme People's Court will be critical for assessing exposure and adapting strategies.
Navigating the Evolving Landscape
China's updated approach to anti-sanctions enforcement through civil suits represents a notable evolution in its legal framework. It provides Chinese parties with direct avenues for redress while signaling to international actors the potential consequences of certain compliance decisions.
Businesses and legal advisors are advised to assess their positions proactively, incorporating these developments into risk management frameworks. The combination of clarified rules, institutional support, and demonstrated court outcomes suggests the mechanism will play an increasingly prominent role in cross-border disputes.
