Expert Guide to Financial Sanctions Enforcement in China

Chinese law does not bring EU Russia sanctions laws into effect. Moreover, in China, no national laws have explicitly imposed sanctions upon Russia. 

China has established an anti-foreign sanctions mechanism. Under the mechanism, the main legislations include the Anti-foreign Sanctions Law (“AFSL”), the Unreliable Entity List Provisions (“UELP”) and the Measures for Blocking Improper Extraterritorial Application of Foreign Laws and Measures (“Measures”). 

Under the AFSL, there is a two-pronged approach that can be taken for anti-foreign sanction purposes: 

• Administrative actions: Chinese authorities can impose countermeasures against foreign countries, organisations, or the responsible persons that implement discriminatory restrictive measures targeting Chinese citizens or organisations, or otherwise interfere with China’s internal affairs (“Discriminatory Restrictive Measures”).  
• Civil liability: Entities or individuals that have assisted in implementing the Discriminatory Restrictive Measures shall only bear civil liability if claims for breach of contract were filed by the discriminated Chinese persons or entities. 

Moreover, the AFSL obliges individuals and organisations to comply with the countermeasures imposed by Chinese authorities imposed with regard to Discriminatory Restrictive Measures against China. 

According to the UELP, the state establishes an Unreliable Entity List system to take corresponding measures against foreign entities engaging in the following behaviours in international economic and trade activities and related activities: (1) endangering China’s national sovereignty, security, and development interests; (2) violating normal market transaction principles by interrupting normal transactions with Chinese enterprises, other organisations, or individuals, or taking discriminatory measures against Chinese enterprises, other organisations, or individuals, seriously damaging the legitimate rights and interests of Chinese enterprises, other organisations, or individuals. Possible measures against the listed foreign entities include: restricting or prohibiting import/export activities; restricting or prohibiting investments in China; entry restrictions for personnel and transportation; restricting or revoking work permits, stay or residence qualifications; imposing fines; and other necessary measures.

 The Measures apply to the extraterritorial application of foreign laws and measures under circumstances in violation of international laws and basic norms governing international relations, or circumstances in which any Chinese citizen, legal person or other organization is improperly prohibited or restricted from conducting normal economic and trade activities and relevant activities with any third country (region) or its citizen, legal person or other organization. If a Chinese citizen, legal person, or other organization encounters such a situation, they have an obligation to report to the commerce department of the State Council. If the working mechanism headed by the commerce department of the State Council determines that the foreign law or measure is indeed an improper extraterritorial application, it may issue a prohibition order stating that it shall not be recognized, executed, or complied with. Chinese citizens, legal persons, or other organizations must comply with the prohibition order (for example, not complying with foreign secondary sanctions as required by the order), otherwise they may face warnings, time-limited corrections, fines, and other penalties. 

The earlier Measures to some extent overlap with the later AFSL. The UELP, on the other hand, follows a different approach and constitutes a different concept.

Chinese law does not bring EU Russia sanctions laws into effect. Moreover, in China, no national laws have explicitly imposed sanctions upon Russia. 

Chinese law does not bring EU Russia sanctions laws into effect. Moreover, in China, no national laws have explicitly imposed sanctions upon Russia. 

Chinese law does not bring EU Russia sanctions laws into effect. Moreover, in China, no national laws have explicitly imposed sanctions upon Russia. 

Under the AFSL, if any entity fails to implement or cooperate in implementing the countermeasures imposed thereunder, the entity will be subject to legal liability in accordance with laws. However, AFSL does not provide what types of legal liabilities will be imposed, and stays quite broad. As mentioned above, AFSL stipulates relevant civil and administrative liabilities. Furthermore, if the conduct rises to the level of a crime, criminal liability will be pursued under applicable provisions of the Criminal Law. 

There is no explicit provision under the UELP stipulating the legal liabilities (including criminal liabilities) for breach of sanctions imposed thereunder. However, if any entities do not comply with the UELP in a way which may endanger national security or involving criminal acts such as trade secret infringement etc., criminal liability will be pursued under applicable provisions of the Criminal Law. 

Under the Measures, there is a provision on criminal liability, i.e. staff from the MOFCOM must maintain confidentiality for Chinese citizens, legal persons, or other organizations reporting relevant situations. Failure to do so can result in administrative penalties or, if it constitutes a crime, criminal liability according to applicable laws.

The penalties for a criminal breach will depend on what crimes the specific breach behaviours may constitute.

Depending on the specific crimes which the breach behaviours constitute, the public security organs, the people’s procuratorates, the supervision commission, national security department etc. may conduct investigation into criminal breaches.

As mentioned above, under the AFSL, there is a two-pronged approach that can be taken for anti-foreign sanction purposes:

• Administrative liability: Chinese authorities can impose countermeasures against foreign countries, organisations, or the responsible persons individuals that implement Discriminatory Restrictive Measures;
• Civil liability: Entities or individuals that have assisted in implementing the Discriminatory Restrictive Measures shall bear civil liability, with the claims of breach of contract filed by the discriminated Chinese persons or entities. 

In addition, under the Measures, Chinese citizens, legal persons, or other organizations that fail to truthfully report relevant information as required or fail to comply with prohibitions may be subject to warnings and ordered by the MOFCOM to rectify the situation within a specified period. Depending on the severity of the circumstances, fines may also be imposed.

For civil liability, the compensation amount depends on the claims raised by the plaintiff and the evidence they can provide to prove the occurred damages.

For administrative liability, the Measures only stated that the competent commerce department of the State Council may impose a penalty against him/it depending on the seriousness of the circumstances, but there no specific penalty amount or range has been stipulated.

As mentioned above, there are two approaches, administrative measures and civil litigations can be taken under the ASML. 

For the civil liability claims, the discriminated Chinese persons or entities can file civil litigation application with Chinese courts by claiming breach of contract against the foreign entities or individuals that have assisted in implementing the Discriminatory Restrictive Measures. 

For the administrative liability, as stipulated in the Measures, the competent commerce department of the State Council is in charge of giving warning, ordering corrections within a specified time limit, and imposing a fine.

Please see the official FAQs on AFSL here (Chinese only).

Please see the official FAQs on UELP here (Chines only).

Please see the official FAQs on the Measures here (Chinese only).