China Legal Science 2025年第1期 | 论中国反外国制裁法律体系及其实施机制完善

学术 2025-01-17 10:56 北京

CHINA’S LEGAL SYSTEM OF ANTI-FOREIGN SANCTIONS AND THE IMPROVEMENTS OF ITS IMPLEMENTATION MECHANISMS

Du Juan

TABLE OF CONTENTS

I. INTRODUCTION

II. HIGHLIGHTS OF CHINA’S LEGAL FRAMEWORK OF ANTI-FOREIGN SANCTIONS

A. Application Targets

B. Working Mechanism

C. Countermeasures

D. Exemption and Prohibition

E. Compensation for Damages: Lawsuit and Support

F. Other Legislation on Countermeasures

III. NAVIGATING THE INTERSECTION OF SANCTIONS AND ANTI-SANCTIONS: COMPLIANCE CHALLENGES AND LEGAL FOUNDATIONS

A. Compliance Dilemma amid Sanctions and Anti-Sanctions

B. The Legality of Anti-Sanctions Measures

IV. MAIN PROBLEMS AND POTENTIAL IMPROVEMENTS OF CHINA’S LEGAL REGIME OF ANTI-FOREIGN SANCTIONS

A. Administrative Enforcement

B. Judicial Application: Improving Anti-Sanctions Prosecution Mechanism

C. Legal Compliance: Improving the Anti-Sanctions Exemption Mechanism

V. CONCLUSION

In order to counter foreign economic sanctions, China promulgated three specialized laws and regulations in 2020 and 2021, thus establishing its legal system of anti-foreign sanctions. This system provides China with the legal basis to respond to foreign unilateral sanctions and discriminatory restrictive measures. In recent years, as China has actively engaged in anti-sanctions practices and implemented anti-sanctions laws and regulations, various practical problems have gradually emerged. China is currently confronting the issue of how to further improve the implementation of its anti-sanctions laws and regulations. In this context, this paper comprehensively examines China’s current legal system of anti-foreign sanctions. It then delves into two prominent issues arising from the implementation of China’s anti-foreign sanctions laws: compliance dilemma amid sanctions and anti-sanctions, and the legality of anti-sanctions measures. Finally, this paper identifies the problems with China’s current legal regime of anti-foreign sanctions and proposes potential pathways for its improvements.

I. INTRODUCTION

Economic sanctions, defined in contemporary times as economic measures, as distinct from diplomatic or military measures, are adopted to oppose the behavior of a sanctioned subject or to induce a change in the policies, practices or even political structure of a sanctioned subject. In recent years, Chinese economic entities and individuals have been frequently affected by groundless economic sanctions imposed by foreign countries or organizations. For example, the European Union, the United Kingdom, Canada, etc., have initiated sanctions against China over various issues. In addition, as of September 2024, a total of 760 Chinese entities and individuals have been the subject of US unilateral sanctions; among them, 694 entities and individuals have been included in the Specially Designated Nationals and Blocked Persons List (the SDN List) by the Office of Foreign Assets Control of the US Department of the Treasury, and 65 Chinese companies have been included by the US in the Non-SDN Chinese Military-Industrial Complex Companies List. The Chinese companies sanctioned under this program belong to a wide range of important industries and sectors, such as aerospace engines, space communications, heavy industrial manufacturing, nuclear power, communications, satellites, railway construction, shipbuilding, oil extraction, navigation, semiconductors and rocket manufacturing. As a result, the economic and trade activities of many sanctioned Chinese entities have been greatly restricted.

In response, China has announced relevant countermeasures through the Ministry of Foreign Affairs. In addition, in order to counteract the unilateral sanctions in accordance with the law and provide legal support for China to safeguard its national security interests, the Ministry of Commerce of the People’s Republic of China (MOFCOM) promulgated the Provisions on the Unreliable Entity List (PUEL) and the Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation and Other Measures (hereinafter referred to as the Rules) in September 2020 and January 2021 respectively. In June 2021, the Standing Committee of the National People’s Congress of the People’s Republic of China (SCNPC) promulgated the Anti-Foreign Sanctions Law (AFSL). Since then, China’s initial legal system for countering foreign economic sanctions has been formed. The enactment of China’s anti-sanctions legislation has become an important factor affecting the international economic order, thus attracting widespread attention.

Previous research has explored the issue of economic sanctions under international law, as well as China’s specific anti-foreign sanctions law and the blocking measures. However, there is still a relative lack of systematic research on China’s overall legal framework of anti-foreign sanctions, as well as a comprehensive analysis of its potential problems and improvement mechanism. This paper therefore aims to comprehensively examine China’s current anti-sanctions laws and practices. Part II examines three specialized anti-sanctions legislation and other related legislation on China’s countermeasures in relevant economic fields. Part III discusses the main concerns arising from China’s anti-sanctions laws. The first one is how sanctions and anti-sanctions create compliance dilemma for global economic entities. The second is, in such cases, whether there is a legitimate basis for anti-sanctions measures and, if so, what the source of their legitimacy is. Part IV identifies the problems with China’s current legal regime of anti-foreign sanctions and proposes potential pathways for its improvements. Part V summarizes the overall content of this paper.

II. HIGHLIGHTS OF CHINA’S LEGAL FRAMEWORK OF ANTI-FOREIGN SANCTIONS

In 2020 and 2021, China’s executive and legislative branches enacted three specialized anti-foreign sanctions laws and regulations, namely the PUEL, the Rules and the AFSL, to counter unilateral sanctions, interference and long-arm jurisdiction. The PUEL establishes an ‘unreliable list’ similar to the US SDN List, which strengthens China’s proactive approach to countering foreign sanctions. The Rules provide a domestic legal basis for refusing to recognize, implement and comply with foreign sanctions laws and measures. The AFSL establishes an overarching framework for enhancing China’s legal tools to counter ‘discriminatory restrictive’ foreign sanctions.

A. Application Targets

The PUEL is applicable only to foreign enterprises, organizations or individuals, where ‘foreign’ refers to countries and regions other than China. Thus, the PUEL excludes the possibility of applying the unreliable entities list (UEL) to enterprises, organizations or individuals in Chinese mainland, Hong Kong, Macao and Taiwan. Therefore, if a foreign entity commits an act that jeopardizes China’s national sovereignty, security or development interests, or seriously harms the lawful rights and interests of a Chinese enterprise, organization or individual, the MOFCOM may include the foreign entity in the UEL.

China has adopted a general rather than an enumerative legislative model, which is evident from a provision in the Rules that refers to ‘the extraterritorial application of foreign laws and measures in violation of international law and the basic principles of international relations’. The general legislative model adopted by China has broadened the scope of the Rules to include potential new sanctions that may occur in the future. However, an overly broad approach may lead to unclear standards of application, leaving room for various possible interpretations.

The AFSL was enacted to respond to the unilateral sanctions imposed on China by foreign countries. The word ‘anti’ in the title of this legislation indicates that its focus is on ‘countermeasures’. According to the AFSL, China will take countermeasures in response to four main situations: (i) containment and suppression of China by foreign countries; (ii) imposition of discriminatory restrictions on Chinese citizens and organizations by foreign countries; (iii) interference in China’s internal affairs by foreign countries; and (iv) foreign countries, organizations or individuals committing, assisting or supporting acts that jeopardize China’s sovereignty, security and development interests.

B. Working Mechanism

China has established a working mechanism for the application and enforcement of anti-sanctions laws. This working mechanism does not refer to an independent state organ but rather a government linkage mechanism involving the participation of relevant departments of the central state organs. For example, the operation of the UEL requires a department to take the lead in planning and implementing the relevant measures. Therefore, the PUEL proposes that the office of the working mechanism be located in the competent department of commerce of the State Council. The working mechanism provided for in the Rules is similar to that of the PUEL, i.e., a government linkage mechanism led by the MOFCOM and the National Development and Reform Commission in conjunction with the Ministry of Foreign Affairs (MFA), the Ministry of Finance, the Ministry of Public Security, the General Administration of Customs, the People’s Bank of China and other relevant departments.

Similar to the PUEL and the Rules, the AFSL provides for the establishment of a coordination mechanism for anti-foreign sanctions work, with this mechanism being responsible for coordinating the relevant work. Thus, the main body for the implementation of countermeasures is either a single department of the State Council or multiple departments of the State Council working in concert, with different authorities responsible for determining, suspending, altering or cancelling different countermeasures. However, unlike the PUEL and the Rules, the AFSL does not emphasize ‘the competent department of commerce of the State Council’. In addition, the AFSL places special emphasis on the function of the Ministry of Foreign Affairs to publicize the countermeasure list and countermeasures, which is in line with China’s practical experience of announcing countermeasures through the Ministry of Foreign Affairs over the years.

C. Countermeasures

The working mechanism may decide to impose countermeasures against the relevant targets in light of the actual situation and will make public announcements if so. Such measures may include restricting or prohibiting foreign entities from engaging in China-related import and export activities and investing in China, limiting the entry of relevant personnel into China, and restricting or revoking the eligibility of the relevant personnel for work permits, residence or stays in China.

In addition, the AFSL has established a countermeasure list that is similar in form to the US SDN List but completely different in content. The AFSL’s countermeasure list system authorizes relevant departments of the State Council to issue decisions to include in the countermeasure list individuals and organizations that are ‘directly or indirectly involved in the formulation, decision-making, and implementation’ of discriminatory restrictive measures against China. Notably, the AFSL does not provide for the inclusion of foreign countries in the countermeasure list, which reflects the defensive nature of the AFSL, as well as China’s adherence to the path of peaceful development and avoidance of interstate conflicts.

To further enhance the flexibility of the countermeasure list, the AFSL stipulates anti-sanctions on the relevant affiliated persons. However, the affiliated persons are not automatically subject to anti-sanctions measures, which need to be formally decided on and announced by the relevant departments of the State Council depending on the actual circumstances. The countermeasures stipulated by the AFSL include two categories. The first category is enumerative measures, including banning entry into China, freezing property, prohibiting or restricting conducting related transactions and other necessary measures. The second category is catch-all measures to address behaviors endangering the country’s national sovereignty, security and development interests, and other necessary countermeasures stipulated by relevant laws, administrative regulations and departmental rules. Although the AFSL prohibits ‘organizations and individuals within China’ from engaging in transactions and cooperation with entities sanctioned by China, it does not prohibit ‘organizations and individuals outside China but of Chinese nationality’ from engaging in transactions and cooperation with such entities, indicating that China respects the freedom of Chinese enterprises abroad to engage in transactions outside Chinese territory.

D. Exemption and Prohibition

The PUEL allows Chinese enterprises, organizations or individuals to conduct specific transactions with the foreign entities listed on the UEL under special circumstances upon approval. It is not clear regarding what constitutes ‘special circumstances’ in the PUEL, but in practice, it may include situations in which cutting off transactions with the foreign entity would seriously affect the production and operation of the enterprise, lead to bankruptcy, make a large number of people unemployed, and damage social stability.

The Rules prohibit the improper extraterritorial application of foreign laws and measures that unduly prohibit or restrict Chinese citizens from engaging in normal economic, trade and related activities with a third state (or region) or its citizens. After comprehensively considering whether the foreign laws and measures violate international law and principles governing international relations, their possible impact on China’s national sovereignty, security and development interests, and their possible impact on the lawful rights and interests of Chinese citizens, the competent department of commerce of the State Council will decide to issue a prohibition order not to accept, execute, or observe the relevant foreign legislation and measures. For Chinese entities that violate the prohibition order, the competent Chinese commercial authorities may take measures such as giving a warning, ordering to rectify within a specific period of time, and imposing a fine. The objects that are not accepted or executed are mainly foreign judgments, rulings or decisions with extraterritorial effects, and the objects that are not observed are mainly foreign laws and administrative orders with extraterritorial effects. Furthermore, the Rules provide for an exemption mechanism similar to that of the PUEL, allowing Chinese entities to be exempted from complying with the prohibition order upon application, and establishing a brief procedure for exemption applications, which is slightly more specific than that of the PUEL.

E. Compensation for Damages: Lawsuit and Support

The Rules provide Chinese citizens with a means of compensation for damages caused by the relevant party’s compliance with foreign legislation and other measures within the scope of a prohibition order. Such means mainly refer to civil lawsuits, which give Chinese citizens, legal persons or other organizations the right to institute legal proceedings to seek compensation for damages caused by the ‘compliance party’. However, in the absence of clear legal standards for ‘compliance’ and in the context of free trade, it is difficult to determine whether the termination of a transaction by a party is the result of compliance with foreign laws and measures or is merely a commercial consideration. Therefore, the right to institute legal proceedings granted by the Rules is subject to uncertainty in terms of jurisdiction, determination criteria, scope of application and other factors.

In addition, to encourage Chinese citizens, legal persons or other organizations to actively comply with the prohibition order, the Rules require the relevant Chinese government departments to provide necessary support to those who have suffered significant losses as a result of complying with the prohibition order. However, many Chinese entities are concerned that the Rules are unclear as to whether the Chinese government will actually provide such support, what the criteria for such support will be and how such support will be provided. In practice, the Chinese government may consider providing the necessary support in the form of tax exemptions and reductions, and in particular may consider reducing the tax burden on relevant entities in domestic and foreign transactions.

F. Other Legislation on Countermeasures

There are also provisions in a number of other Chinese laws and regulations that authorize the implementation of countermeasures. They enable the relevant government departments of China to take countermeasures in response to discriminatory restrictive measures imposed by foreign countries in fields including trade, investment, export control, protection of personal information, data security, and import and export customs, and against acts that jeopardize China’s national sovereignty, security or development interests.

These authorizing provisions are relatively fragmented. From a legal hierarchy perspective, they are mainly provided for in laws and administrative regulations. At the level of laws, these provisions are contained mainly in the Law on Foreign Relations, the Foreign Trade Law, the Personal Information Protection Law, the Data Security Law, the Export Control Law and the Foreign Investment Law issued by the SCNPC (See Table 1).

Table 1: Other Laws Allowing Countermeasures in Response to Foreign Discriminatory Restrictive Measures

At the level of administrative regulations, these provisions are mainly set out in the Regulations on the Administration of the Import and Export of Goods, the Regulations on International Ocean Shipping, the Anti-Dumping Regulation, the Countervailing Regulation, and the Regulation on Safeguard Measures (See Table 2). Therefore, China’s current anti-sanctions law regime specifically consists of three specialized pieces of legislation and the authorizing provisions in these relevant laws and administrative regulations, which together provide the legal basis for China to counteract foreign sanctions and discriminatory restrictive measures.

Table 2: Other Administrative Regulations Allowing Countermeasures in Response to Foreign Discriminatory Restrictive Measures

III. NAVIGATING THE INTERSECTION OF SANCTIONS AND ANTI-SANCTIONS: COMPLIANCE CHALLENGES AND LEGAL FOUNDATIONS

With the implementation of anti-foreign sanctions laws and regulations in recent years, the compliance dilemma and the legality of anti-foreign sanctions measures have become a focus of attention.

A. Compliance Dilemma amid Sanctions and Anti-Sanctions

China’s anti-foreign sanctions laws set out obligations that require entities and individuals to implement or cooperate in the implementation of countermeasures by the Chinese government, as well as not to implement or assist in the implementation of discriminatory restrictive measures against Chinese citizens or organizations, otherwise these entities and individuals will be held legally liable. These obligations apply not only to entities in China but also to foreign entities, i.e., foreign entities are prohibited from implementing or assisting in the implementation of relevant discriminatory restrictive measures against China, or they will be subject to legal action. Moreover, the Rules have established an anti-sanctions prosecution mechanism that authorizes Chinese citizens and organizations to seek compensation for damages through civil litigation against relevant responsible entities and individuals.

Thus, in practice, domestic and foreign economic entities may violate China’s anti-sanctions laws if they comply with the foreign sanctions laws, and face the risks of penalties or civil lawsuits in China. Alternatively, if they do not comply with such foreign sanctions rules, they could be punished by the sanctioning country. Therefore, the conflict of laws arising from sanctions and anti-sanctions has placed domestic and foreign entities ‘between a rock and a hard place’, leading to a ‘compliance dilemma’ regarding whether to comply with either foreign sanctions laws or Chinese anti-sanctions laws.

To illustrate this issue, consider an example involving a sanctions and anti-sanctions relationship between the US and China. The US not only requires US entities to comply with its sanctions rules; in addition, its long-arm jurisdiction extends the application of its sanctions rules to Chinese entities and third-country entities. Thus, in practice, four scenarios arise, with the sanctions restricting (1) US entities from conducting transactions with China’s sanctioned entities; (2) third-country entities from conducting transactions with China’s sanctioned entities; (3) Chinese entities from conducting transactions with sanctioned entities of the third country; and (4) transactions between Chinese entities.

Chinese anti-sanctions legislation requires that entities in China shall not comply with the improper extraterritorial application of foreign sanctions rules and shall implement countermeasures taken by the Chinese State Council, and that no foreign entities shall implement or assist in the implementation of discriminatory restrictive measures against China. Thus, both Chinese and US entities, as well as third-country entities, are caught in the compliance dilemma. Complying with the US sanctions would mean the probable violation of China’s anti-sanctions legislation, incurring serious consequences such as legal liabilities and the loss of the Chinese market. Conversely, complying with China’s anti-sanctions legislation would leave the relevant entities at the risk of being directly sanctioned by the US, which could lead to the proliferation of sanctions.

It appears that some multinationals comply with US sanctions rules over China’s anti-sanctions rules in practice to avoid the severe consequences of non-compliance. This reality may have led some private entities to believe that China’s anti-sanctions legislation lacks a deterrent impact, especially from the fact that there have not been many implementation practices of China’s anti-sanctions legislation to date. In fact, this fully reflects the prudence and restraint of the Chinese government in the practice of anti-sanctions, and that it neither is aggressive nor will abuse anti-sanctions measures. However, these enterprises should not underestimate the potential risks in violating China’s anti-sanctions laws.

Sanctions and anti-sanctions are in a process of conflict and confrontation between countries. For China, adopting anti-sanctions measures is an inevitable choice, as it must protect its national interests and individual interests. However, in both situations of sanctions and anti-sanctions, the national interests and individual interests protected are not always identical. China makes trade-offs in the light of the international environment and specific circumstances and considers how to avoid a compliance dilemma for domestic and foreign entities by striking a balance between safeguarding the interests of the state and the interests of individuals.

B. The Legality of Anti-Sanctions Measures

The legality of unilateral sanctions has long been a ‘grey area’, with the international community considering them to be inconsistent with the principles set out in the Charter of the United Nations. However, the anti-foreign sanctions, implemented in accordance with laws, are defensive and passive; they may have a certain basis of legitimacy in domestic and international law.

Firstly, under domestic law, the legal basis of anti-sanctions measures derives from the basic norms of China’s foreign relations stipulated in the Preamble to the Constitution of the People’s Republic of China, i.e., ‘China pursues an independent foreign policy, observes the five principles of mutual respect for sovereignty and territorial integrity, mutual nonaggression, mutual noninterference in internal affairs, equality and mutual benefit, and peaceful coexistence … China consistently opposes imperialism, hegemonism and colonialism.’ The Constitution is the fundamental law of China, with the highest legal status. The measures taken against foreign unilateral sanctions are in line with the basic norms stipulated in the Constitution and are legitimate under domestic law.

Secondly, under international law, the legal basis of anti-sanctions measures derives from the basic principles of international relations that are generally recognized by the international community, namely, the principle of the sovereign equality of member states and the principle not to intervene in domestic matters. In addition, the security exception clause provided for in article 21 of the GATT, which allows members of the WTO to take actions that they consider necessary for the protection of essential security interests in time of war or other emergency in international relations. However, such measures should be in line with the principle of ‘good faith’. The anti-sanctions measures are necessary to protect national security interests in a state of emergency in international relations, the essence of which is to offset and counteract the unilateral economic sanctions. The anti-sanctions measures do not pursue specific foreign policy objectives, nor do they intend to impose China’s own will on other countries. They are generally in line with the requirements of the principle of ‘good faith’. Therefore, the security exception clause under WTO law constitutes another source of legitimacy for the anti-sanctions measures.

IV. MAIN PROBLEMS AND POTENTIAL IMPROVEMENTS OF CHINA’S LEGAL REGIME OF ANTI-FOREIGN SANCTIONS

China’s current anti-sanctions legislation provides a basic framework for anti-sanctions mechanisms, yet the relevant implementation mechanisms need further improvement. Therefore, in the context of sanctions and anti-sanctions, the problem facing China is how to effectively implement the anti-foreign sanctions laws, which will rely on three main aspects: administrative enforcement, judicial application and legal compliance.

A. Administrative Enforcement

Executive-led implementation is an important aspect of China’s anti-sanctions legislation. There is room for further improvement of China’s current anti-sanctions legislation in terms of specific implementation rules and the implementation agency.

1. Introducing Implementation Regulations for Anti-Sanctions Laws. — With the emergence of external challenges in recent years, and under the legislative philosophy of ‘first call for emergencies’, China enacted three specialized anti-foreign sanctions laws and regulations in the two years of 2020 and 2021. However, China’s current anti-sanctions legal system needs more detailed implementation rules.

Firstly, the relevant enforcement procedures of the anti-sanctions rules need to be improved. For example, the AFSL has 16 articles in its entire text. Except for article 5, i.e. countermeasure targets, and article 6, i.e. countermeasures, which adopt an enumerative legislative model, the other articles are relatively general and abstract. A similar situation exists for the PUEL and the Rules as well.

Secondly, the meanings of important terms in the anti-sanctions legislation need to be clarified. For example, articles 3 and 12 of the AFSL use the expression ‘discriminatory restrictive measures’, which is a key term for the initiation and implementation of anti-sanctions measures. The understanding of this term is crucial. However, different subjects may have different interpretations of the meaning of ‘discriminatory’. The expression of ‘restrictive measures’ indicates that it may also include restrictive measures such as export control or customs withholding orders, but it may be difficult to decide whether such restrictive measures are discriminatory. In the context of the AFSL, ‘violating international law and the basic norms of international relations’ and ‘interfering in the internal affairs of the country’ may constitute some of the elements of the criteria for identifying discriminatory restrictive measures.

Thirdly, the anti-sanctions lists need more publicity. China’s current anti-sanctions lists comprise two categories: the countermeasure list established in the AFSL and the UEL set out in the PUEL. In practice, however, countermeasures are usually announced by the MFA or the MOFCOM, and the information on countermeasures published on the MFA’s website is sometimes incomplete and found only in the statements of the MFA’s spokespersons. Furthermore, in terms of the presentation of anti-sanctions lists, neither the AFSL nor the PUEL includes or appends a specific ‘list’ or provides relevant direction on its publication.

2. Establishing a Specialized Agency for Implementing Anti-Sanctions Measures. — In the enforcement of China’s anti-sanctions laws and regulations, administrative enforcement authorities are in a leading position, responsible for drawing up and adjusting countermeasure lists and specific countermeasures. A number of Chinese laws and administrative regulations contain provisions authorizing countermeasures against foreign economic sanctions or discriminatory restrictive measures, but different administrative authorities and administrative enforcement departments are specified in different laws and regulations. This may lead to a situation in which countermeasures are taken by a variety of authorities and may conflict with each other.

China’s current anti-sanctions laws and regulations do not specify a specialized authority for anti-sanctions, instead stipulating that ‘relevant departments of the State Council’ are responsible for their implementation. For example, the AFSL stipulates that the formulation of the countermeasure list and the implementation of countermeasures shall be the responsibility of the ‘relevant departments of the State Council’, but in practice, the implementation of most specific countermeasures stipulated therein requires the coordination and cooperation of other relevant departments. The PUEL also provides for the establishment of a working mechanism with the participation of the relevant departments of the central state organs, specifying that the competent department of commerce under the State Council is mainly responsible for the specific work. Similar to those under the AFSL, the countermeasures proposed by the PUEL require coordination between different departments in practice. Therefore, as the implementation of anti-foreign sanctions laws and regulations involves various sectors of the economy and a number of government departments, as well as cross-departmental competence, it is necessary for China to establish a specialized anti-sanctions agency to coordinate and implement anti-sanctions measures.

B. Judicial Application: Improving Anti-Sanctions Prosecution Mechanism

The judicial application of China’s anti-sanctions laws and regulations mainly deals with civil lawsuits filed in Chinese courts by Chinese parties affected by discriminatory restrictive measures. China has established an ‘anti-sanctions prosecution mechanism’, which explicitly stipulates that Chinese citizens and organizations can demand that the relevant responsible persons stop infringing on their lawful rights and interests and seek compensation for damages through a civil lawsuit. Whether Chinese courts can effectively apply such an anti-sanctions prosecution mechanism to individuals or organizations that fail to implement or cooperate in the implementation of countermeasures is an important issue for the effective implementation of China’s anti-sanctions laws.

According to the current provisions, China’s anti-sanctions legal system is mainly centred on public enforcement by state administrative organs, with article 12 of the AFSL and article 9 of the Rules being relevant to the anti-sanctions prosecutions. The anti-sanctions prosecution mechanism carries an important function of judicial relief and legal deterrence. However, the current provisions of the mechanism focus more on principles than operational issues. Moreover, the issues that have aroused much discussion and concern about this mechanism are mainly focused on the jurisdiction of anti-sanctions prosecution and the recognition and enforcement of foreign anti-sanctions prosecution judgments.

At present, neither the Rules nor the AFSL has made special provisions on the jurisdiction of anti-sanctions prosecution, and Chinese courts need to rely on the relevant provisions of the Civil Procedure Law to establish jurisdiction. The defendant to an anti-sanctions prosecution claim is usually located outside China, and the jurisdiction provided for in China’s Civil Procedure Law for litigation against a defendant who does not have a domicile in China is relatively conservative. In practice, there may be a situation where a Chinese party’s overseas interests are infringed upon outside China and none of the bases of jurisdiction under the Civil Procedure Law are in China. As a result, China’s people’s courts would be unable to exercise jurisdiction. This would frustrate the institutional function of the anti-sanctions prosecution mechanism.

When a Chinese court makes a judgment on an anti-sanctions prosecution and the defendant has no enforceable property in China, the judgment needs to undergo an application for recognition and enforcement in a third country. However, there is a great deal of uncertainty as to whether the courts of the third country will deem such a judgment as an ordinary civil and commercial judgment. In practice, it is often easy for other countries to refuse recognition and enforcement of anti-sanctions prosecution judgments on the grounds that they are contrary to their own public policies, thereby calling into question the effectiveness of such a mechanism.

In summary, the anti-sanctions prosecution mechanism, which allows private individuals to sue for damages directly in their own courts, essentially transfers and cedes the right to initiate state countermeasures from the state to a private subject. Although it is an important tool in the ‘legal toolbox’ for countering foreign sanctions, whether, when and how to implement it requires further exploration in practice.

C. Legal Compliance: Improving the Anti-Sanctions Exemption Mechanism

The effective implementation of China’s anti-sanctions laws depends on the active cooperation and compliance of domestic and foreign entities. However, both domestic and foreign entities are faced with the compliance dilemmas. A proper pathway to address compliance challenges in response to sanctions is the establishment of exemption mechanism. This is a legal mechanism whereby the state authorizes certain specific subjects in specific fields or specific transactions as exceptions to the scope of application and implementation of anti-sanctions measures. It is an indispensable part of the sanctions and anti-sanctions legislation of various countries and is an effective means to alleviate the conflict of interests in the implementation of anti-sanctions measures.

The PUEL and the Rules provide for corresponding provisions on anti-sanctions exemptions that allow Chinese entities to apply to the administrative organ for limited compliance with the extraterritorial application of foreign legislation and other measures if they do not conflict with the national interests, and to apply to the administrative organ to engage in specific transactions with entities on the UEL in line with the national interests. However, China needs to improve the procedural rules of the exemption mechanism in the PUEL and the Rules. Clear procedural rules contribute to the effective implementation of the exemption mechanism and provide private entities with clear guidelines for applying for exemptions.

The AFSL does not provide for any anti-sanctions exemption provisions. The AFSL should introduce an exemption mechanism that, at the political level, can serve the function of accurately transmitting diplomatic signals. When the international political environment changes, the state organs can regulate the intensity of countermeasures by exempting specific transactions or revoking exemptions that have already been implemented to maintain the authority and flexibility of countermeasures. At the economic level, some Chinese entities are currently unable to detach themselves from European and US financial systems, markets, and products, and they may thus suffer losses if China’s anti-foreign sanctions laws are implemented indiscriminately. Therefore, when the implementation of countermeasures threatens the core economic interests of Chinese entities, or when the damage caused by the countermeasures exceeds the benefits of their implementation, the state organs may, depending on the actual circumstances, grant exemptions from implementing countermeasures to the relevant entities of the country.

In the era of economic globalization, the dilemma of balancing the security interests of the state with the economic interests of private entities is a difficult issue that no country can avoid when implementing sanctions and anti-sanctions measures. Therefore, implementing an anti-sanctions exemption mechanism, clarifying the conditions, criteria, and procedural rules for applying for exemptions, and establishing an operational exemption mechanism are effective means to alleviate the compliance dilemma of domestic and foreign entities, balance the interests of the state and those of private entities, and guarantee sustainable development.

V. CONCLUSION

In response to unilateral sanctions frequently imposed by other countries, China has preliminarily established an anti-sanctions legal system. This legal system has changed China’s previous passive attitude towards dealing with economic sanctions. With the enactment of these specialized anti-sanctions legislation, China’s anti-sanctions legal system has evolved from a fragmented framework to a more consolidated system. Initially, China only enacted laws and regulations in some key areas, such as foreign trade and investment, export control, protection of personal information, and data security, resulting in fragmented provisions on countermeasures against ‘discriminatory prohibitions, restrictions, or other similar measures’ by foreign countries. As unilateral sanctions continue to challenge its national sovereignty and security interests, China promulgated three more targeted laws and departmental regulations, namely the PUEL, the Rules and the AFSL. They provide China with more specific legal tools to deal with foreign sanctions and to protect its national security and interests.

In recent years, China has engaged in several anti-sanctions practices based on its anti-foreign sanctions law and regulations. However, it is notable that China has been greatly refraining from implementing anti-sanctions measures, as the abuse of application of sanctions and anti-sanctions may ratchet up the tension between compliance with sanctions laws and compliance with anti-sanctions laws, creating conflicts of laws and a compliance dilemma for both domestic and foreign entities. Therefore, China has been very cautious in implementing its anti-sanctions laws and regulations to avoid the detrimental effects of anti-sanctions on global sustainable development. Such caution will help to balance national interests and international interests, but it is still essential for China to continue improving its anti-sanctions laws and regulations to provide a strong guarantee of the rule of law and ensure the effective protection of its national sovereignty, security, and development interests.

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