State Council Decree 835: Countering Unlawful Extraterritorial Jurisdiction Measures in Practice — China’s Second Response to EU FSR Investigations
On 19 August 2026, the Ministry of Justice (the “MOJ”) of the People’s Republic of China (the “PRC”) issued MOJ Announcement No. 8 of 2026, in which it declared that certain measures of the European Union related to foreign subsidy investigations constitute “unlawful extraterritorial jurisdiction measures” (“Announcement No. 8”).
Announcement No. 8 states the following: Pursuant to Articles 3 and 6, among others, of the PRC Regulations on Countering Unlawful Extraterritorial Jurisdiction Measures Imposed by Foreign Countries (State Council Decree 835, “Decree 835”), the MOJ, in conjunction with the Ministry of Commerce and other relevant departments, conducted an investigation and determined that the European Union’s (the “EU”) use of the Foreign Subsidies Regulation (“FSR”) to carry out certain cross-border investigative practices against Chinese entities in the context of its investigation into JD.com constitutes an unlawful extraterritorial jurisdiction measure. No organization or individual may implement or assist in the implementation of such unlawful extraterritorial jurisdiction measures.
Announcement No. 8 does not question the EU’s jurisdiction to review the JD.com case, nor does it seek to halt the entire FSR investigation itself. Instead, Announcement No. 8 appears to be directed at extraterritorial investigative measures that require Chinese entities to provide extensive information relating to activities within China. According to a spokesperson of the MOJ, such cross-border information requests would arbitrarily require Chinese entities to provide extensive and unnecessary information regarding operations within China.
Against this background, the principal effect of Announcement No. 8 is not to prevent the EU investigation from proceeding, but to limit the – allegedly unnecessary – cross-border information flow from China to the EU in this regard. However, Announcement No. 8 does not specify which particular information requests, investigative measures or categories of information are considered “extensive and unnecessary” or otherwise fall within the scope of the identified unlawful extraterritorial jurisdiction measures. The order not to implement or assist in the implementation of such unlawful extraterritorial jurisdiction measure may also affect suppliers, customers and other counterparties to the extent that they are requested to provide information or otherwise assist in responding to the investigation. Companies involved in FSR investigations may therefore need to assess, on a case-by-case basis, where the requested information is stored or generated, whether Chinese banks, government authorities, suppliers, customers or other business partners may be requested to provide information or assistance, and whether the request falls within the scope of the unlawful extraterritorial jurisdiction measures identified by the MOJ. Where appropriate, companies may also need to consider seeking approval under the exception mechanism provided by Decree 835. However, there is currently no publicly available precedent demonstrating how this mechanism would operate in practice or under what circumstances such approval would be granted.
Announcement No. 8 is only the second determination issued by the MOJ under Decree 835 since the Decree entered into effect on 7 April 2026. The first determination, MOJ Announcement No. 5 of 15 May 2026, concerned the EU's FSR investigation of Nuctech. Both announcements relate to cross-border information gathering by the EU in the context of FSR investigations.
Taken together, Announcements No. 5 and No. 8 indicate that PRC authorities are increasingly willing to use Decree 835 against foreign investigative measures that require Chinese entities to provide information located in China. This development is particularly relevant for multinational groups involved in EU FSR proceedings, foreign sanctions compliance, regulatory investigations and cross-border information requests.
Announcement No. 5 and Announcement No. 8 were both issued under Decree 835, which was promulgated and entered into effect on 7 April 2026. Decree 835 has attracted significant attention from both the business community and legal practitioners. Together with the PRC Anti-Foreign Sanctions Law, the Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures, the Provisions on the Unreliable Entity List and other related rules, Decree 835 is the latest addition to China's evolving legal framework addressing foreign sanctions, extraterritorial measures and perceived long-arm jurisdiction.
Decree 835 provides for the mechanism on how to identify unlawful foreign measures, it introduces a new Malicious Entity List, detailed and enforceable countermeasures and prohibition orders. Key aspects of Decree 835 are as follows:
1. Identification Standard
Decree 835 sets out the standard on how to identify whether foreign measures constitute unlawful extraterritorial jurisdiction measures. According to Article 6 of Decree 835, the identification process is led by the MOJ, acting together with other relevant government authorities. In assessing whether a foreign measure should be treated as an unlawful extraterritorial jurisdiction measure, the following factors should be comprehensively considered:
(1) Whether the measure violates international law and the basic norms governing international relations;
(2) Whether relevant conduct subject to the extraterritorial jurisdiction measure imposed by a foreign State has a sufficient nexus with such State;
(3) Whether the measure harms China's national sovereignty, security, and development interests, or infringes upon the legitimate rights and interests of Chinese citizens and organizations; and
(4) Other factors that shall be considered.
Where a foreign measure is determined to constitute an unlawful extraterritorial jurisdiction measure, the MOJ may make that determination public by way of an announcement. Following such an announcement, no organization or individual shall implement, or assist in the implementation of, the relevant measure.
As can be seen from the above, the statutory standard is deliberately broad and affords the authorities significant discretion in assessing whether a foreign measure constitutes an unlawful extraterritorial jurisdiction measure. This may lead to some legal uncertainty, and it is hard to predict in advance whether a particular foreign regulatory or investigative request could fall within the scope of Decree 835.
For companies operating in or dealing with China, this means that certain foreign investigative, regulatory or enforcement measures with an extraterritorial dimension may require careful assessment from both foreign-law and PRC-law perspectives. In practice, companies may face the scenario that compliance with foreign laws may be regarded as unlawful from the perspective of PRC authorities. In such case, it should be considered whether internal escalation, PRC-law review or other risk-control steps are required before responding to the foreign request.
Decree 835 provides for a limited exception mechanism. Where, due to special circumstances, it is indeed necessary for any Chinese citizens or organizations to implement or assist in the implementation of unlawful extraterritorial jurisdiction measures imposed by foreign States, they can submit an application to the MOJ by providing relevant facts, reasons, and the scope of implementation or assistance required. However, it currently remains unclear how such applications will be handled by the MOJ in practice.
2. Malicious Entity List
Decree 835 newly introduces a so-called Malicious Entity List. Together with existing tools, such as the Unreliable Entity List and the Countermeasure List under the PRC Anti-Foreign Sanctions Law, it forms part of China’s evolving framework for a list-based countermeasure system.
Article 8 of Decree 835 provides that foreign organizations or individuals that facilitate or participate in the implementation of any unlawful extraterritorial jurisdiction measures imposed by foreign States may be put on the Malicious Entity List.
Once a foreign organization or individual is included on the Malicious Entity List, far-reaching countermeasures and restrictions may be imposed. This includes:
(1) Market access & mobility restrictions:
— visa denial, entry bans, deportation/expulsion;
— work, stay, and residence restrictions in China.
(2) Asset related measures:
— Seizure, freezing, or confiscation of movable and immovable property in China.
(3) Business & data restrictions:
— Ban or restriction on transactions, cooperation, and data / personal information flows with Chinese parties.
(4) Trade and investment restrictions:
— Prohibition or limitation on import/export activities and investments in China;
— Restriction on entry of goods and conveyances into China.
(5) Financial penalties:
— Fines.
(6) Catch-all clause:
— Other necessary measures.
Noteworthy is the possibility of restrictions relating to data and personal information transfers. This reflects the interaction between China’s data protection regime and its countermeasure framework and indicates that China’s response tools for unlawful extraterritorial jurisdiction measures are no longer limited to traditional sanctions-style measures but may also extend to data-related restrictions.
It is also important to note that the Malicious Entity List has a “look-through” effect. Countermeasures and restrictive measures may not only apply to the listed entity, but also to organizations or individuals actually controlled by, or established or operated with the participation of, a listed entity. Accordingly, the impact of a designation may extend beyond the listed entity itself and could affect other entities within the same corporate group where relevant control or operational links exist.
From a compliance perspective, this “look-through” mechanism is significant with regard to multinational groups and entities with complex ownership or operating structures. Risk assessment should not be limited to whether a contractual counterparty itself appears on the Malicious Entity List, but it may also need to be considered whether any relevant person or entity, which exercises actual control over, participates in the establishment of, or is involved in the operation of the contractual counterparty, is listed. This may require more scrutiny and a more detailed review of ownership chains, governance arrangements, management involvement and other substantive links with the listed party.
Article 9 of Decree 835 provides for a mechanism for adjustment or relief after countermeasures or restrictive measures have been imposed. An affected organization or individual may apply to the State Council department that made the relevant decision for suspension, modification or revocation of the measures, supported by facts and reasons such as the steps taken to rectify the relevant conduct or to eliminate its consequences. The competent department may also assess the implementation and effectiveness of the measures in practice and, based on the assessment or its review of the application, decide through the applicable working mechanism to suspend, modify or revoke the measures and make a public announcement accordingly.
3. Prohibition Order
According to Article 13 of Decree 835, the MOJ may decide to prohibit organizations or individuals from implementing or assisting in the implementation of unlawful extraterritorial jurisdiction measures imposed by foreign States (“Prohibition Order”). Relevant organizations and individuals must comply with a Prohibition Order.
Such a Prohibition Order must be distinguished from the regime under the Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures. Under that regime, where a foreign law or measure is determined to involve “unjustified extraterritorial application”, the PRC Ministry of Commerce (“MOFCOM”) may issue a prohibition order (“Blocking Order”), under which the relevant foreign law or measure is not to be accepted, implemented or observed within the specified scope.
Although both mechanisms relate to the implementation of foreign laws or measures, they differ in several respects. In terms of the issuing authority, a Blocking Order is issued by MOFCOM, while a Prohibition Order under Decree 835 is issued by the MOJ. The Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures are departmental rules and therefore on a lower level in the legislative hierarchy than Decree 835. Blocking Orders are directed at the public and provide that a specified foreign law or measure shall not be accepted, implemented or observed within the scope of the order. By contrast, a Prohibition Order under Decree 835 is addressee and conduct-based: it prohibits specific organizations or individuals from implementing or assisting in the implementation of specified unlawful extraterritorial jurisdiction measures.
The consequences of a violation also differ significantly. A violation of a Blocking Order may result in a warning, an order for rectification within a specified period and fines. A violation of a Prohibition Order under Decree 835 may trigger a much wider range of potentially significant administrative measures, such as rectification orders, restrictions on government procurement, bidding, China-related trade in goods and technologies, international services trade, cross-border data and personal information transfers, exit and entry, stay or residence in China, as well as fines.
By imposing a Prohibition Order, the State Council may prohibit organizations or individuals to implement or assist in the implementation of specified foreign measures, including foreign sanctions or regulatory measures. This may create conflict-of-laws scenarios for multinational companies. Conduct required or expected under foreign laws, sanctions regimes or regulatory measures may, in certain circumstances, be viewed by PRC authorities as prohibited implementation or assistance under Decree 835. Companies may therefore need to assess competing legal obligations on a case-by-case basis and implement appropriate escalation and risk-management procedures.
According to publicly available information, so far, no Prohibition Order has been issued under Decree 835. Accordingly, there is so far no practical guidance under what circumstances PRC authorities would resort to this tool, how a Prohibition Order would be specifically formulated, whether a Prohibition Order would be subject to a fixed time frame, and how modifications or revocations would be handled in practice.
4. Overall Consequences of Violation
Decree 835 provides for civil, administrative and, where applicable, criminal consequences, with different provisions addressing different types of liability.
Article 14 allows affected Chinese citizens or organizations to bring civil claims before PRC courts against parties that implement, or assist in implementing, foreign unlawful extraterritorial jurisdiction measures, seeking cessation of the infringement and compensation for losses.
Article 17 sets out the main administrative consequences for refusing to implement, circumventing, or violating countermeasures, restrictive measures or a Prohibition Order, including rectification orders, activity restrictions, cross-border data-related restrictions, immigration-related restrictions and fines.
Article 18 further provides that criminal liability may arise where the conduct constitutes a criminal offence.
In addition, Article 19 makes it clear that sector-specific regimes, including those relating to anti-corruption, antitrust, anti-unfair competition, export control, data security and judicial assistance, may apply in parallel where relevant.
Taken together, these provisions demonstrate that Decree 835 is not merely declaratory in nature. The Decree provides a framework under which civil claims, administrative measures and potentially criminal consequences may operate in parallel, thereby increasing both regulatory and litigation risks for parties perceived as assisting in the implementation of identified unlawful extraterritorial jurisdiction measures.
5. Conclusion
Although Decree 835 remains at an early stage of implementation, Announcements No. 5 and No. 8 indicate that PRC authorities are prepared to implement and to use the new legal framework. Since the entry into effect of Decree 835, the MOJ has now already acted twice, and both cases involve EU FSR investigations in relation to cross-border information requests. While key enforcement tools under Decree 835, including the Malicious Entity List and Prohibition Orders, have not yet been used publicly, multinational companies should not assume that the regime will remain dormant. Companies involved in cross-border investigations, sanctions compliance, regulatory reporting or information-sharing activities in relation to China should review their internal procedures to ensure that foreign legal obligations are assessed alongside potential PRC-law restrictions. Early identification and escalation of potential conflict-of-laws issues will be increasingly important as the practical application of Decree 835 continues to evolve.
