On April 7, 2026, the State Council of the People’s Republic of China issued the Regulation on Countering Foreign Unjustified Extraterritorial Jurisdiction (the “Regulation”), which took effect immediately upon issuance. The Regulation builds on China’s existing anti-sanctions legal framework, including the Anti-Foreign Sanctions Law of the People's Republic of China (the “Anti-Foreign Sanctions Law”) and the Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures (the “Blocking Rules”). It marks another major step in China’s effort to strengthen its legal response to foreign “long-arm jurisdiction” and other extraterritorial measures affecting Chinese interests.
This article provides a brief overview of the key features of the Regulation.
I. Key Features of the Regulation
The Regulation establishes a more comprehensive framework for identifying foreign extraterritorial measures, issuing blocking orders, granting exemptions, imposing countermeasures, and providing legal remedies.
1. Identification and Assessment of Unjustified Foreign Extraterritorial Measures
Under the Regulation, competent authorities have the power to determine whether a foreign measure constitutes an “unjustified extraterritorial measure.” In making that determination, the authorities may consider factors including:
- whether the measure violates international law or basic principles of international relations;
- whether there is a sufficient or substantive connection between the foreign measure and the relevant conduct or parties;
- whether the measure harms China’s sovereignty, national security, development interests, or the lawful rights and interests of Chinese individuals or entities; and
- other factors provided by law.
These standards may be used to assess the legitimacy of foreign export controls, economic sanctions, investment restrictions, supply chain restrictions, and secondary sanctions.
The Regulation also authorizes the competent authorities to classify foreign measures by risk level and adopt corresponding countermeasures or restrictive actions based on that classification.
2. Prohibition Order and Exemption Mechanism
The Regulation introduces a formal prohibition order system. The competent authorities may issue orders prohibiting relevant parties from implementing or assisting with foreign unjustified extraterritorial measures. Parties that violate prohibition orders may face administrative penalties, including corrective orders, restrictions on government procurement, import and export controls, cross-border data transfer restrictions, entry or exit restrictions, and fines.
Compared with the Blocking Rules, the scope of the new Regulation is significantly broader. The Blocking Rules mainly focused on entities and individuals within China, while the Regulation expressly extends to both domestic and foreign parties.
The Regulation also provides an exemption mechanism. Where compliance with unjustified extraterritorial measures is mandatory under foreign legal requirements, Chinese companies or individuals may apply to the competent authorities for an exemption. If approved, they may comply with the relevant foreign measures within the approved scope. This mechanism provides a potential compliance “safe harbor” for companies facing conflicting legal obligations.
3. Malicious Entity List and Countermeasures
The Regulation allows the competent authorities to place foreign companies and individuals that formulate, implement, or assist in the implementation of unjustified extraterritorial measures on a “Malicious Entity List.” The scope of restrictions may also extend to affiliated entities controlled or operated by listed parties in order to prevent circumvention. Listed parties may apply for suspension, modification, or removal of the relevant restrictions after completing corrective actions required by the competent authorities.
It is worth noting that the “Malicious Entity List” is different from China’s existing “Unreliable Entity List.” The former focuses more specifically on parties involved in, advancing, or implementing foreign unjustified extraterritorial measures targeting China, while the latter generally addresses foreign entities that harm China’s sovereignty, national security, or development interests, or that disrupt normal market transactions.
4. Judicial Remedies
Chinese individuals and companies that suffer losses as a result of foreign unjustified extraterritorial measures may file lawsuits in Chinese courts seeking injunctive relief and damages.
II. Relationship with China’s Existing Anti-Sanctions Framework
The Regulation further expands China’s existing anti-sanctions regime under the Anti-Foreign Sanctions Law and the Blocking Rules. Compared with prior rules, the Regulation applies to a broader range of foreign measures, including supply chain restrictions, investment barriers, and cross-border regulatory actions. It also introduces additional mechanisms such as risk classification, the Malicious Entity List, and anti-circumvention provisions. Overall, the Regulation reflects China’s continued move toward a more comprehensive and implementable anti-sanctions legal framework.
Recent enforcement developments also demonstrate that China is applying its anti-sanctions framework more actively in practice. On May 2, 2026, China’s Ministry of Commerce (“MOFCOM”) issued Announcement No. 21 of 2026, determining that certain U.S. sanctions imposed on five Chinese companies in connection with Iranian oil transactions constituted an “unjustified extraterritorial application” under the Blocking Rules. MOFCOM subsequently issued a blocking order prohibiting the recognition, enforcement, or compliance with U.S. sanctions measures imposed pursuant to Executive Order 13902, Executive Order 13846, and related authorities, including the SDN List designations, asset freezes, and transaction restrictions. The announcement is widely viewed as one of the clearest and most recent examples of China using its anti-sanctions framework in direct response to U.S. sanctions.
III. Implications
The Regulation is likely to increase “dual compliance” risks for multinational companies operating in China. Foreign enterprises and multinational groups operating in China should pay closer attention to the potential conflicts between PRC anti-sanctions and blocking rules and foreign export controls and sanctions laws. Companies may also need to reassess their global compliance policies from a PRC law perspective and establish appropriate mechanisms for internal review, risk escalation, and exemption applications to reduce potential regulatory, civil, and commercial risks in China.