China's New Anti-Sanctions Laws Are Ensnaring Western Companies

China's New Anti-Sanctions Laws: A Shift in Economic Security Toolkit

Since 2020, China has steadily expanded its economic security toolkit to counter Western trade and financial restrictions. What began as a largely defensive framework has evolved into a more assertive Chinese legal architecture designed to penalize companies and individuals for complying with foreign sanctions and export controls.

Beijing has been especially eager to undercut Western policies of extraterritoriality, whereby various governments, most notably the United States, extend sanctions to foreign firms and individuals doing business with the primary sanctions target. Beijing's countermeasures now include the Export Control Law (2020), the Unreliable Entity List (2020), the Anti-Foreign Sanctions Law (2021), the Blocking Rules (2021), the Counter-Extraterritorial Regulation (2026), and the Supply Chain Security Provisions (2026).

Taken together, these instruments mark a significant shift in the country's approach. Beijing is systematically building mechanisms to resist Western extraterritoriality and replicate it with extraterritorial regulation of its own, thereby imposing its jurisdiction beyond China's borders.

The resulting legal environment puts foreign companies in a bind: They can face legal exposure in the West for violating Western sanctions—and in China for complying with them.

Article 12: A Private Right to Sue

Designed as an instrument of self-defense, the Anti-Foreign Sanctions Law is central to this shift. Article 12 of the law gives Chinese individuals and entities a private right to sue another person or company that implements, or assists in implementing, foreign restrictive measures that harm Chinese interests.

In practice, this allows Chinese counterparties to sue when foreign firms refuse to perform contractual obligations on the basis of sanctions or export-control risks.

Case Law: A Growing Trend

The first reported case involving Article 12 arose before the Nanjing Maritime Court in 2024. After a Chinese offshore engineering contractor was listed by a foreign jurisdiction, its Swiss counterparty withheld almost $12 million in outstanding payments under a shipbuilding-related subcontract, citing sanctions concerns.

The Chinese company obtained a preservation order from the court, arresting the vessel involved while allowing construction on that vessel to continue.

Although the dispute was eventually resolved through court-brokered mediation after the Swiss company secured a U.S. sanctions exemption, the case demonstrated Article 12's practical utility.

It can be used to preserve Chinese assets and generate the leverage to bring foreign counterparties back to the negotiating table, even without a final judgment on the merits.

A Second Case: Strengthening the Trend

A second case before the Shanghai Maritime Court strengthened this trend. In 2025, the court ruled against a Singaporean shipping firm that had refused to deliver electronic goods to a Hong Kong manufacturer after learning that the company was on the U.S. entity list.

The court held that the Singaporean company's refusal to unload amounted to the implementation of 'foreign discriminatory restrictive measures,' enabling the Hong Kong party to invoke Article 12.

Beijing's Blocking Rules: A New Regime

Beijing has also begun to activate rules that block Chinese entities from complying with a range of foreign laws. Officially titled Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures, this regime was inspired by the European Union's blocking statute, with which Brussels made it illegal for EU companies to comply with certain U.S. sanctions laws.

The EU statute only prohibits EU companies from complying with U.S. sanctions laws that are deemed to be 'discriminatory' or 'extraterritorial.' In contrast, China's blocking rules are more comprehensive, covering a broader range of foreign laws and regulations.

Implications for Global Trade and Finance

China's new anti-sanctions laws have significant implications for global trade and finance, as they create a complex legal environment for foreign companies operating in China.

The laws penalize companies and individuals for complying with foreign sanctions and export controls, putting foreign companies in a bind.

This can lead to a range of consequences, including legal exposure, reputational damage, and financial losses.

Conclusion

In conclusion, China's new anti-sanctions laws are a significant development in the country's economic security toolkit. The laws penalize companies and individuals for complying with foreign sanctions and export controls, putting foreign companies in a bind.

The implications for global trade and finance are significant, and foreign companies operating in China must be aware of these laws and their potential consequences.