Are China’s rules on the Implementation of Anti-foreign Sanctions Law and Provisions on Foreign IP Disputes restraints on the freedom to litigate?

AFSL Provisions targeting litigation against China's interests

Article 19 of the AFSL Provisions reserves the power of China’s government to take countermeasures against “promoting and implementing litigation by any foreign country, organisation or individual”, which the Chinese government deems will “endanger the sovereignty, security, and development interests of China”, regardless of where such litigation is brought.

Relevant subjects involved in the above proceedings may face countermeasures, including:

• restriction from entering China;
• sealing up, detaining, or freezing of property (including intellectual property and other intangible assets) within China;
• prohibition or restriction on transactions and cooperation;
• compulsory property enforcement; and
• other stricter countermeasures.

There is no published precedent to date where this provision has been applied. So far, articles published in China only discuss examples presenting certain political background, such as the governments of several US states suing relevant Chinese state authorities and demanding compensation on the grounds of China's alleged hoarding of personal protective equipment during the pandemic. Therefore, one could conclude that this provision will be limited to cases of a “high-level” political nature, and ordinary commercial disputes will not be affected. The wording of the AFSL Provisions, however, is broad and does not explicitly exclude litigation initiated by private enterprises against Chinese counterparts.

IP Disputes Provisions privileging Chinese holders' intellectual property rights

The IP Disputes Provisions provide a nexus between IP disputes that recently have required the Chinese legislator's special attention and the ASFL’s regulatory framework. Article 15 and 16 of the IP Disputes Provisions emphasise that “containment or suppression” against China and “discriminatory restrictive measures” (DRM) against Chinese citizens and organisations taken “under the guise of IP disputes” fall within the scope of AFSL. These provisions make clear that countermeasures can be taken against what the Chinese government believes to be foreign countries’ containment, suppression and DRM “under the guise of IP disputes”, and civil lawsuits can be brought by Chinese entities affected by them. This may include legal proceedings in Standard-Essential Patent (SEP) cases and other international IP disputes in which Chinese enterprises are a party.

The concepts of “DRM”, “containment” and “suppression” are introduced in Article 3 of the AFSL, but no laws or regulations provide a statutory definition of these terms. The term “discriminatory” bears some legal meaning (i.e. negative treatment without legitimate reasons and can be used in a legal context). In contrast, “containment” and “suppression” are ambiguous, non-legal terms, which causes uncertainty as to what constitutes “containment” or “suppression” of China.

The IP Disputes Provisions echo recent judicial practice. On 15 January 2025, China’s Supreme People’s Court issued China’s first anti-anti-suit-injunctions in an SEP litigation filed by Huawei against Netgear, prohibiting Netgear and its affiliates from seeking anti-suit injunctions in the US and other foreign courts that would restrict Huawei from initiating or continuing patent infringement proceedings in China. This case demonstrates the government’s heightened focus on IP disputes with foreign counterparts. The SEP disputes between Samsung and ZTE,, whereby Samsung has filed lawsuits against ZTE in several regions around the globe on SEP licensing and the Brazilian State Court in Rio de Janeiro granted a provisional injunction against ZTE's Brazilian 5G patents, have also caught people’s attention. Though there are no actions taken against Samsung to date, the IP Disputes Provisions provide a potential legal basis for actions or countermeasures to be taken in the future, including anti-suit-injunctions. Foreign entities that issue proceedings in other jurisdictions, in defiance of these measures, may face legal consequences such as fines or the refusal to recognise and enforce foreign judgments and arbitral awards in China.

In the absence of clear guidelines on the scope of litigations that are deemed to “endanger the sovereignty, security and development interests of China” under the AFSL Provisions, legal uncertainty may continue and clarification in future regulations or interpretations will be necessary.

Besides the litigation-related provisions described above, the AFSL Provisions also deal with other issues which are of major importance for China-related business of foreign companies.

Legal consequences of implementing, or assisting with implementing, DRM against Chinese citizens or entities

The AFSL entitles Chinese individuals or organisations to bring lawsuits to demand cessation of infringement and compensation for losses against any organisation or individual that “implements or assists in implementing” the DRM taken by any foreign country against them.

In addition to such civil outcomes, the AFSL Provisions also provide for administrative measures to be taken against such organisations or individuals, including:

• conducting interviews;
• ordering to make correction; and
• other corresponding measures.

It is worth noting that, same as the corresponding civil liability, the above administrative penalties not only apply to domestic entities and FIEs but also apply to foreign entities. In addition, “other corresponding measures” gives enforcement authorities wider administrative discretion.

Legal implications of not executing China’s countermeasures

The AFSL obliges onshore organisations and individuals to implement China’s countermeasures to safeguard China’s interests against DRM against Chinese citizens or organisations, or interference with China's internal affairs by foreign countries, or individuals and organisations that have directly or indirectly participated in the formulation or implementation of DRM. For example, if China's countermeasures prohibit or restrict the onshore organisations or individuals from activities such as conducting relevant transactions or cooperation with certain individuals and organisations that interfere in China's internal affairs, the onshore organisations and individuals must implement such countermeasures. “Onshore organisations and individuals” include foreign-invested enterprises (FIEs) established in China and foreign individuals appointed as their company representative / management personnel.

The AFSL Provisions further set out the competent authorities’ duties of enforcement of countermeasures and grant those authorities the power to conduct investigations and consultations in respect of the same. It might be more common for enterprises in China to receive requests from the competent departments of the State Council to conduct such investigations and consultations, particularly those involved in actions covered by the AFSL. To ensure compliance and mitigate legal risks, companies should prepare in advance.

The AFSL Provisions offer more clarity by setting forth the following legal consequences for failure to execute China’s countermeasures:

• order to make a correction;
• prohibition or restriction from engaging in government procurement, bidding, or tendering;
• prohibition or restriction from participating in activities related to the import and export of goods and technologies, or international trade in services;
• prohibition or restriction on receipt or provision of data or personal information from or to foreign countries; and
• prohibition or restriction from leaving or staying in China.

New exemption mechanism

In addition, the AFSL Provisions provide for special application for exemption to conduct relevant activities with organisations and individuals against whom countermeasures have been taken. Such application must be submitted to the competent departments of State Council supported by relevant facts and justification. This exemption mechanism is a new measure under the AFSL Provisions, since the AFSL did not include an exemption mechanism. The evidentiary requirements, review timelines, and substantive evaluation criteria of the exemption mechanism remain subject to further clarification.

The AFSL Provisions and the IP Disputes Provisions signal a potential shift in China’s approach to cross-border litigation and dispute resolution. The explicit linkage of foreign IP disputes to the AFSL indicates China’s readiness to potentially weaponise administrative tools to deter foreign judicial interventions, such as anti-suit injunctions. By empowering authorities to impose countermeasures against foreign proceedings deemed to threaten China’s interests, including private IP disputes, these provisions result in greater risk for multinational enterprises engaged in cross-border disputes involving Chinese entities, and underscore the importance of proactive risk assessment in dispute resolution strategies.​

In addition, the AFSL Provisions strengthen China's administrative authority to monitor compliance and enforcement of the AFSL and show its growing commitment to protect its interests. Actual enforcement may gain momentum in the wake of additional US tariffs and sanctions and, probably to a lesser degree, measures taken by the EU and other countries.

It would be desirable for the State Council to provide clarity on the AFSL Provisions. However, this uncertainty is likely to remain. Not only domestic enterprises and FIEs operating in China, but also foreign enterprises and organisations, should try to balance these Chinese compliance standards against other duties and responsibilities in their global operations or activities, in particular those resulting from conflicting sanctions regimes of other jurisdictions.