Jia Lissa
Overview of the New Regulatory Framework
The regulations are grounded in a suite of foundational Chinese laws, including the National Security Law, the Foreign Relations Law, and the Law on Countering Foreign Sanctions. According to Article 1, the primary objectives are threefold: to preserve national sovereignty and security, to protect the lawful rights of Chinese entities, and to uphold an international order rooted in international law.
At its core, the regulation establishes that China will not tolerate the application of foreign laws that violate international norms or interfere in China’s internal affairs. Article 2 emphasizes a "holistic view of national security," suggesting that the response to extraterritorial jurisdiction is not merely a legal matter but a strategic necessity involving the coordination of domestic development and international relations.
A Comprehensive Working Mechanism for Identification
To ensure a unified and systematic response, the State Council has mandated the creation of a specialized "working mechanism." This inter-departmental body is tasked with the planning, coordination, and execution of responses to foreign legal encroachment. Under Article 5, various departments of the State Council are required to share information and cooperate in identifying measures that meet the threshold of "improper extraterritorial jurisdiction."
The State Council’s legal affairs department holds a central role in this process. Under Article 6, this department is authorized to conduct investigations, consult with foreign parties, and ultimately identify specific foreign measures that should be countered. The criteria for such identification are clearly defined:
- Whether the foreign measure violates international law or basic norms of international relations.
- Whether there is an "appropriate connection" between the foreign state and the conduct it seeks to regulate.
- The extent of the impact on China’s sovereignty, security, and the legitimate rights of its citizens.
Once a measure is identified as improper, the State Council may issue a public announcement. Crucially, Chinese organizations and individuals are prohibited from implementing or assisting in the implementation of these identified measures unless a specific exemption is granted through the working mechanism.
Countermeasures and the Malicious Entity List
One of the most significant aspects of the 2026 regulations is the formalization of countermeasures. Article 8 outlines a robust "Malicious Entity List," which targets organizations and individuals who participate in or enforce improper extraterritorial measures against China. The sanctions available to the Chinese government are extensive and include:
- Travel Restrictions: Denial of visas, entry bans, and deportation.
- Asset Seizure: The sealing, seizing, or freezing of movable and immovable property within China.
- Commercial Prohibitions: Restricting or banning transactions, data sharing, and general cooperation with listed entities.
- Trade Barriers: Banning the import and export of goods and services associated with the malicious entities.
- Financial Penalties: Direct fines and restrictions on investment within China.
The regulations also allow these measures to be extended to organizations controlled by, or established by, those on the Malicious Entity List, ensuring that entities cannot bypass sanctions through shell companies or subsidiaries.
Chronology of China’s Counter-Sanctions Evolution
The promulgation of the PRC Regulations on Countering Improper Extraterritorial Jurisdiction by Foreign States is the latest step in a clear chronological progression of Chinese legal policy:
- January 2021: The Ministry of Commerce (MOFCOM) issued the "Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures." This was an administrative-level precursor to the current regulation.
- June 2021: The Standing Committee of the National People’s Congress (NPC) passed the "PRC Law on Countering Foreign Sanctions," providing a high-level legal basis for retaliatory measures.
- July 2023: The "PRC Foreign Relations Law" took effect, codifying the right of the state to take "countermeasures and restrictive measures" against acts that violate international law.
- April 2026: The current State Council Regulations (Guoling No. 835) are enacted, providing the granular procedural detail necessary for the practical enforcement of the preceding laws.
This timeline illustrates a shift from reactive administrative rules to a permanent, codified statutory framework.
Supporting Data and Geopolitical Context
The necessity of these regulations is underscored by the increasing frequency of extraterritorial legal actions globally. Data from various international trade monitors indicate that between 2020 and 2025, the number of Chinese entities added to foreign restrictive lists (such as the U.S. Entity List or the SDN List) increased by approximately 45%. Furthermore, secondary sanctions—where a foreign state penalizes a third-party entity for dealing with a sanctioned party—have become a primary point of contention.
In 2025, it was estimated that over 1,200 Chinese firms faced some form of foreign extraterritorial restriction, affecting sectors ranging from semiconductors and aerospace to finance and telecommunications. The 2026 regulations are a direct response to this environment, providing a legal basis for Chinese firms to resist foreign compliance demands that would harm domestic interests.
Legal Recourse and Private Litigation
A notable feature of the new regulations is the empowerment of private citizens and organizations. Article 14 grants Chinese entities the right to initiate litigation in Chinese courts against any party that implements or assists in improper extraterritorial measures. Plaintiffs can seek injunctions to stop the infringement and demand compensation for losses incurred due to the foreign measure’s enforcement.
This creates a "clawback" mechanism. If a multinational corporation complies with a foreign sanction and, in doing so, terminates a contract with a Chinese firm, that Chinese firm can now sue the multinational in a Chinese court for damages. This puts global companies in a difficult "dual-compliance" position, forced to choose between the legal requirements of a foreign jurisdiction and the legal prohibitions of China.
Official Responses and International Reactions
While the Chinese government characterizes these regulations as defensive and necessary for the protection of international law, the international business community has expressed a mix of caution and concern.
Chinese Ministry of Foreign Affairs: A spokesperson stated that the regulations are a "necessary step to safeguard the international rule of law and the legitimate rights of Chinese citizens. China remains committed to opening up, but this opening must be based on mutual respect and the principle of non-interference."
Industry Associations: Several international chambers of commerce have issued statements noting the increased complexity of doing business. "The 2026 regulations heighten the compliance risk for firms operating in both China and the West," noted a representative from a major trade council. "Companies now face a potential ‘Catch-22’ where following the law in one jurisdiction may lead to severe penalties in another."
Legal Analysts: Experts in international law suggest that the regulations are designed to increase the "cost of compliance" for foreign states seeking to use their legal systems as foreign policy tools. By creating a credible threat of asset seizure and litigation in China, Beijing aims to deter third-party entities from participating in foreign sanctions regimes.
Broader Impact and Implications
The long-term implications of Guoling No. 835 are profound for global trade and legal practice. First, it signals the "judicialization" of geopolitical competition. Rather than relying solely on diplomatic protests or trade tariffs, China is now using its domestic court system and administrative apparatus to challenge the extraterritoriality of foreign law.
Second, the regulations place a heavy emphasis on industry self-discipline. Article 16 calls for industry associations and chambers of commerce to guide their members in lawful and compliant business practices while providing a feedback loop for identifying "improper" foreign measures. This suggests a collaborative approach between the state and the private sector in defending economic interests.
Third, the regulation introduces a "Reciprocity Principle" (Article 4). This indicates that China will not only defend against foreign extraterritoriality but may also exercise its own extraterritorial jurisdiction in cases where there is an "appropriate connection" to China. This could lead to a future where Chinese law is applied to conduct occurring outside its borders, provided it impacts Chinese national security or development interests.
Finally, the inclusion of Article 19 ensures that these regulations do not exist in a vacuum. They are designed to complement existing laws regarding anti-monopoly, export controls, and data security. As of April 7, 2026, the PRC has established one of the world’s most comprehensive legal frameworks for countering foreign legal influence, fundamentally altering the landscape for international compliance and global corporate strategy.
Raul Delapena Setiawan
Nila Kartika Wati
