On 9 January 2021, the Ministry of Commerce of China ("MOFCOM") issued the Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures (阻断外国法律与措施不当域外适用办法, "Blocking Rules"), which came into force on the date of its promulgation.
The Blocking Rules consist of 16 articles, which establish blocking mechanisms against the improper application of the "long-arm jurisdiction" of foreign laws and sanctions ("Foreign Sanctions") on Chinese entities through various measures. These measures include the following:
- Imposing reporting obligations on Chinese citizens, legal entities and other organisations adversely affected by the Foreign Sanctions within 30 days;
- Establishing a working mechanism to assess and determine the existence of unjustified extra-territorial application of the Foreign Sanctions;
- Issuing prohibition orders ("Prohibition Orders") declaring the Foreign Sanctions unjustifiable and unenforceable, and prohibiting the acceptance, execution, or observation of relevant foreign legislation and other measures;
- Allowing Chinese entities to apply to MOFCOM for exemption from compliance with the Prohibition Orders; and
- Allowing Chinese entities adversely affected by the Foreign Sanctions to seek civil recourse in Chinese courts from entities which have infringed such Chinese entities' legitimate rights and interests by complying with the Foreign Sanctions.
As the Blocking Rules have been released early this year and their terms are general in nature, it is difficult to predict how they may be enforced. It is expected that the Chinese government will issue more detailed implementing regulations to clarify the uncertainties found in the Blocking Rules, as they typically do with similar general regulations. At the same time, there have also been heated discussions recently on whether boycotting cotton from the Xinjiang Uyghur Autonomous Region based on alleged enforced labor will trigger the issuance of a Prohibition Order under the Blocking Rules.
