Potential EU sanctions on Chinese Companies and Chinese Anti-Sanctions Measures

15 Feb 2024, 58 mins ago

It has recently been reported that the EU is proposing to impose sanctions on several Chinese companies over their links with Russia.

If EU Member States approve the sanctions plan, it will be the first time that Chinese companies will be hit by EU sanctions. Although the details of the proposal have not been disclosed to the public, it is believed that European companies may be banned from dealing with such Chinese companies. It is also unclear whether the UK government will follow the EU’s practice, but there is a real possibility that the UK will take some measures against Chinese entities based on approaches previously applied.

If the EU’s plan comes to fruition, we can anticipate that China will adopt anti-sanction measures against the EU in accordance with its Anti-Foreign Sanctions Law (AFSL) which it promulgated in June 2021. Although it is widely believed that this statute was enacted in response to the sanctions imposed by the US government, it applies to all foreign States, organisations or individuals that endanger the sovereignty, security and development interests of China. As such, this law may be used as a starting point for predicting what countermeasures China may take.


Article 4 of the AFSL provides that the State Council of China is authorised to decide and designate individuals or entities directly or indirectly involved in the development, decision-making or implementation of the discriminatory restrictive measures by foreign countries in a countermeasure list (the “Countermeasures List”). Article 5 further extends the scope of the Countermeasures List to spouses, immediate family members, and senior officers, as well as entities or organisations where the designated individuals perform senior executive functions or have de-facto control over, or a stake in, setting-up or operating these entities or organisations.

If a foreign individual or entity is designated under the Countermeasures List then, pursuant to Article 6 of the AFSL, the State Council of China is authorised to:

  • Deny the issuance of visas, forbid entry into the country, cancel visas or expel an individual from China;
  • Seize, attach or freeze their movable and immovable property and other types of property within the territory of China;
  • Prohibit or restrict organisations and individuals within the territory of China from engaging in relevant transactions, cooperation and other activities with them; and/or
  • Take other necessary measures.

It is worth noting that, in comparison with the draft AFSL, the adopted version narrows the scope of countermeasures against property by removing the State Council’s power to “forfeit” property, whilst extending the scope of proscribed activities by prohibiting or restricting “cooperation and other activities”. 

Remedies for sanctioned Chinese entities

Article 12 of the AFSL states that no organisation or individual may implement or assist in the implementation of discriminatory restrictive measures taken by a foreign State against Chinese citizens or organisations. If any organisation or individual violates the rule and infringes on the lawful rights and interests of a Chinese citizen or organisation, such a Chinese citizen or organisation is entitled to bring an action before a Chinese court to demand that the infringement be ceased, and that compensation be paid for the losses.

It should be noted that although this provision, as well as the current Civil Procedure Law of China, do not specify that the Chinese courts have exclusive jurisdiction over sanctions-related disputes, it empowers the Chinese party, which is either a designated entity/individual under the EU/US/UK regime or an non-designated entity/individual that has suffered losses arising out of a foreign sanctions regime, to file a suit in a Chinese court against any organisation or individual that implements or assists in the implementation of sanction measures taken by a foreign state, regardless of the alleged infringer’s whereabouts or the place where the alleged infringement occurred. 

One may recall that, in June 2020, the Russian Federation imposed a new law on exclusive jurisdiction over disputes involving entities or individuals subject to international sanctions. This law has triggered numerous anti-suit injunction applications to English courts, especially in cases concerning the validity of international arbitration agreements. It seems that China deliberately does not follow Russia’s pattern on exclusive jurisdiction but takes a more flexible approach instead. However, it is hard to predict whether China will amend its laws to grant the Chinese courts exclusive jurisdiction over sanctions-related disputes, should more countries follow suit and, similarly to the US, impose financial sanctions on Chinese entities on a larger scale.

How Gherson can assist

Gherson has extensive experience in dealing with the UK and EU sanctions from various perspectives. Our experts have helped sanctioned clients in respect of compliance with sanctions, challenging sanctions designations and sanctions-related disputes against government authorities and/or other commercial parties.

Gherson’s Litigation and Arbitration Team are highly experienced in advising on international investor-state disputes. Please do not hesitate to contact us for further advice, send us an e-mail, or, alternatively, follow us on XFacebook, or LinkedIn to stay up-to-date.

The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please do not hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.

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