China (PRC)

By Alexander H. E. Morawa, S.J.D.

On 9 January, 2021, the Ministry of Commerce (MOFCOM) of the People’s Republic of China published its Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures.[1] The Rules are fairly detailed and comprise various substantive and procedural provisions. And yet, they remain vague and – perhaps intentionally – imprecise in crucial respects.[2]

This article addresses these rules and considers the context of combating long-arm jurisdiction and countermeasures more broadly.

The rules encapsule primarily two core aspects of “blocking legislation,” namely the prevention of the enforcement of foreign judgments and the compliance with orders of foreign authorities.[3] The ministry seeks to counteract only such legislation or measures that meet three criteria: a) they are unjustified; b) they are created by foreign (governmental or relevantly similar) entities, and c) they are applied extraterritorially. The “justification” criterion leaves much room for legal interpretation as well as political tactics on a case-by-case basis.

For instance, regulating or even criminalising conduct damaging to national security or other fundamental state interests applying protective jurisdiction – as in the extradition case of Huawai’s Meng – are manifestations of the recognised (albeit extraordinary) permissive principle under international law and require heightened justification. “Foreign” and “extraterritorial” are more objective assessments to be made: given that the rules’ purport is to further compliance with international law and best practices in international relations (Art. 2), Chinese agencies will want to apply them consistent with standards established on the international plane.

“Foreign” is a term that denotes another sovereign state, but not an international organisation or entity created by a treaty. Such a reading does, for instance, exclude the law of the European Union, since that is not foreign but international. “Foreign” should not be read as identical to “non-Chinese,” since there is non-Chinese legislation that is not foreign, but international or supranational (EU), even if China is not a party to these treaties.

It is noteworthy that courts in various jurisdictions would possibly interpret the phrase “foreign legislation and other measures” differently than MOFCOM and particularly as comprising administrative (executive), but not judicial decisions, considering the strict separation of the judicial from the other branches of government. That Art. 7 (1) stipulates that foreign acts covered by a prohibition order shall not be “accepted, executed, or observed” and that Art. 9 (2) gives parties adversely affected by a “judgment or ruling made in accordance with the foreign legislation” a remedy in a peoples’ court suggests but does not conclusively answer the question whether foreign judgments are “measures” within the meaning of the rules that can themselves and separate from the underlying legislation or other measure be subject to a prohibition order.

“Extraterritoriality” today has a fairly clear meaning in public international law and comprises essentially state action that takes place in or has direct effect on what is outside of the jurisdiction of a state. That jurisdiction is primarily territorial. Some jurisdiction is lawfully exercised extraterritorially, e.g., within embassies or on vessels and aircraft; some legally or illegally because of (usually law-enforcement) action abroad, and some illegally because a state effectively controls foreign territory (e.g., Turkey in Cyprus, Russia in Moldova).

The rules do not appear to govern ordinary foreign laws operating within the realm of that jurisdiction, even if they apply to Chinese persons or entities operating within it. Thus, they aim only at foreign laws that extend their reach into the jurisdiction of other states, and of course at least indirectly into the “personal” jurisdiction of China as they affect the rights of Chinese persons or entities, or presumably into that of international law itself. Extradition requests, which are generally based on bilateral or multilateral treaties creating reciprocal obligations (as in Huawei’s Meng’s case) will likely not be considered “extraterritorial.”

The rules emphasise that China targets foreign law that it sees as a “violation of international law” and “basic principles of international relations” (Art. 2) and that foreign law and “other measures” provided for in treaties and agreements ratified or accepted by China are not affected. That seems to cover all general (WTO) and special international and bi-lateral arrangements for trade and economic relations (e.g., the US-China Economic And Trade Agreement, phase 1 (2020)[4] and the pending EU-China Comprehensive Agreement on Investment (2021)[5]), in particular, but could reasonably extend to other treaties that China is a party to as long as they relate somehow to economic activities.

Many of the rules deal with criterion (a), namely the justification/justifiability of foreign laws and measures. The rules inter alia set up a working mechanism (Art. 4); establish a reporting duty (Art. 5); provide for prohibition orders and exceptions thereto (Art. 7 and 8) and stipulate sanctions for those complying with foreign law found to be unjustified (Art. 9). Crucially, Art. 6 enumerates certain “factors” for the working mechanism to consider when assessing the justifiability of such extraterritorial foreign law, which may potentially happen retroactively.[6]

Two of them (paras. 1 and 3) appear to raise primarily legal and/or economic questions, namely if there is a violation of international law and the impact of such foreign law on the rights and interests of Chinese persons and entities. Of course, it remains to be seen how “international law” will be interpreted in practice. Is it the international law that is binding upon China, or the international law that is in force with respect to the foreign state that issues the legislation or other measure? Could MOFCOM argue that a Dutch law runs counter to EU trade law and block it? Could it consider prosecutorial or judicial decisions in extradition cases – to the extent they fall under the rules and are “extraterritorial,” which is questionable – which violate fair trial guarantees under UN or Organization of American States international law?

Para. 2, on the other hand, requires an assessment of the “potential impact on China’s national sovereignty, security and development interests,” which are primarily political questions. Para. 4 leaves the door wide open for considering “other factors.” Of course, there are similarities to Council Regulation (EC) No 2271/96, but one should bear in mind that virtually all EU action is ultimately subject to judicial review by the ECJ. The exclusivity of authority and discretion of the non-judicial working mechanism foreseen in the rules, also with respect to exemptions that affected parties may apply for and the possible revocation of prohibition orders, seems to be quite far-reaching.

Much like direct interventions by political actors in formal legal proceedings – as is alleged with respect to former US President Donald Trump’s statements hinting that he might intervene in the Meng extradition proceedings thus possibly making her fate a bargaining chip in the greater trade war,[7] which Meng’s lawyers assert “ha[ve] subverted this process [and] destroyed the integrity of this process”[8] – overly broad exemption and revocation rules in the absence of judicial review will likely engender distrust in the rules as such.

Let us now turn to those elements in the rules that are likely to raise legal concerns of those that will have to navigate the realm governed by foreign action and Chinese counteraction.

Rule 9 para. 1 refers to a “person” who complies with foreign extra-territorial legislation subject to a prohibition order and harms a Chinese person or entity and confers to the Chinese actor standing in a people’s court to sue for damages. The rules remain silent as to who such a “person” might be. It seems it could be a Chinese or non-Chinese person or entity, or multinational corporation incorporated in China, or anyone else. Does Rule 9 establish a basis for jurisdiction of a people’s court over foreign persons or entities who have no connection to China other than having infringed the interests of a Chinese entity by abiding with foreign legislation abroad? Would it be permissible for a Chinese people’s court to award damages against a foreign entity simply for complying with its own national law that may incorporate another nation’s extraterritorial legislation based on that state’s own sovereign decision? International law’s sovereignty paradigm would suggest that a state may decide to accept, reject or ignore foreign law and subject its own nationals to the consequences of such a choice.

Rule 9 para. 2 adds to the uncertainty when it stipulates that “[w]here a judgment or ruling [is] made in accordance with the foreign legislation within the scope of the prohibition order” and causes harm to a Chinese entity, the party adversely affected by such a judgment may sue for damages in a people’s court.

The rules remain entirely silent as to the origin of such a judgment. Could it be a) a foreign court’s judgment, b) an arbitral award, or c) an international court’s judgment? While c) can reasonably be excluded pursuant to Arts. 2, 6 para. 1, and 15 of the Rules, a) and b) remain possible, and might cause discord or contention. A foreign court would probably not consider itself subject to subsequent review by a people’s court pursuant to the rules and would potentially decline enforcement of a people’s court’s ruling if it came back to it for enforcement. An arbitral tribunal might likewise be established as the final arbitrator of a dispute and not consider its ruling subject to subsequent review by a people’s court. While Rule 9 (3) delegates the enforcement power to the people’s court, the other court applying foreign legislation may disagree on whether that power is lawful. The ultimate challenge is: the rules may prompt conflicting judgments that diminish the legal certainty needed for functioning economic relations.

The problem is not new. International commerce works best when there is a solid legal basis, a reliable framework for action even in competition, and certainty about the rules. Any unilateral extraterritorial-legislation and anti-extraterritorial-legislation rules damage these foundational truths. This applies to the rules at hand just as much as to the EU’s and other national blocking regulations. The rules seem to recognise that their effect may be detrimental to commerce, as they offer in particular Chinese companies that are adversely affected by the extraterritorial application of non-Chinese legislation the option of seeking “support” from the Chinese government (which may or may not include monetary compensation) and potentially recovering losses by filing civil lawsuits with a people’s court.

Given the timing of the adoption of the rules and the dispensing with the 30-day publication for comments rule, it is appropriate to consider them as a response to both trade and political sanctions – and especially the “secondary sanctions” affecting the economic relationship between a third country and the target country – of the waning previous US administration and an effort to match earlier measures taken by the EU[9] and other states.

Commentators have pointed out that the rules “may put non-US international companies in the difficult position of having to choose between compliance with US sanctions or Chinese rules.”[10] Facing – potentially competing – extraterritorial regulatory requirements and countermeasures will not likely encourage joint ventures, as legal counsel will undoubtedly advise extra caution in light of the vagueness and ambiguity of the colliding norms, which in turn are subject to international law. “Balancing the expectations of foreign regulatory regimes with the new requirements under the rules”[11] will be a major challenge.



Alexander H.E Morawa IHC

Alexander H.E Morawa is a senior partner for public international law at Kingsfield Law Office and a recurring visiting professor at American University Washington College of Law. He represents petitioners in various international courts and tribunals established by the United Nations and the Council of Europe


The opinions expressed in this article are those of the author and do not reflect the opinions of InHouse Community Ltd, or it’s employees.



[2] Cf.







[9] Council Regulation (EC) No 2271/96 of 22 November, 1996 protecting against the effects of the extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom, OJ L 309, November 29, 1996

[10] Wilmer Hale, China Issues Blocking Rules to Counter Foreign Sanctions and Other Measures, January 12, 2021


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