China has introduced a new set of regulations designed to counter what it describes as the “unjustified” extraterritorial application of foreign laws, marking a significant legal strategy shift aimed at protecting its sovereignty and economic interests. The Regulations on Countering Unjustified Extraterritorial Application of Foreign Legislation, which took effect on April 13 after approval by China’s State Council, provide a 20-point framework intended to identify, block, and respond to foreign measures Beijing considers improper exercises of jurisdiction beyond their borders.
The rules target foreign actions perceived to violate international law or harm China’s sovereignty, security, development interests, or the legitimate rights of its citizens and organizations. This development reflects China’s response to what officials and legal experts characterize as escalating foreign pressure, particularly from the United States, in the form of sanctions and regulatory actions affecting shipping, energy trade, finance, technology, and third-party entities.
Experts note that previous Chinese legislation—including the National Security Law, Foreign Relations Law, and the 2021 Anti-Foreign Sanctions Law—addressed unilateral sanctions and interference but lacked detailed mechanisms for combating extraterritorial jurisdiction that does not directly threaten sovereignty. The newly issued regulations aim to fill this gap by establishing procedural guidelines for assessing foreign measures, coordinating government responses, issuing prohibition orders, and enforcing countermeasures through litigation and compliance supervision.
A notable feature of the regulations is the establishment of a “Malicious Entity List,” which, unlike the earlier “Unreliable Entity List” focused on trade misconduct, targets foreign organizations and individuals who “promote or participate” in enforcing extraterritorial laws deemed improper by China. Entities placed on this list could face a range of punishments, including asset freezes, transaction bans, investment restrictions, fines, as well as diplomatic and immigration limitations.
Legal scholars have expressed concern about the broad and vague language of the regulations, which could apply to a wide array of foreign entities—from consulting firms to government officials—potentially generating significant compliance challenges. Critics also highlight the risk of increased uncertainty for global supply chains, especially amid current geopolitical tensions such as the U.S. naval blockade of Iranian ports in the Strait of Hormuz, a critical energy trade passage. China has condemned the blockade as dangerous and irresponsible, emphasizing the destabilizing effects on international trade.
The new regulations also seek to address practical dilemmas faced by Chinese companies caught between conflicting legal demands. For example, under a provision allowing the State Council to issue prohibition orders, Chinese organizations can be forbidden from complying with foreign extraterritorial laws. Failure to comply with these orders may result in penalties including fines and restrictions on data transfers, effectively creating a legal shield for Chinese firms. This mechanism aims to prevent situations similar to a 2015 U.S. court ruling that compelled Bank of China to comply with American legal demands, which Chinese experts argue placed firms in a “compliance trap.”
The regulations incorporate certain mitigating elements, such as a “rectification” process that allows foreign entities to seek removal from the Malicious Entity List if they alter their behavior. Additionally, Chinese individuals and companies may apply for exemptions when compliance with foreign laws is unavoidable, offering a legal “escape valve” intended to prevent diplomatic crises like the high-profile detention of Huawei CFO Meng Wanzhou, which was partly attributed to conflicting jurisdictional claims.
Observers suggest the new measures reflect China’s broader strategy of shifting from reactive diplomatic protests to proactive legal defenses in geopolitical affairs. While the regulations may initially see limited enforcement, their primary impact could be influencing multinational corporations’ risk assessments and compliance decisions amid increasing global legal complexities. Legal experts anticipate forthcoming test cases in sectors such as shipping, finance, and technology licensing to clarify the scope and application of the new rules.