China enacts blocking rule to fight Western sanctions
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China enacts blocking rule to fight Western sanctions

China’s legislature passed a new anti-sanctions law Thursday following the enactment of blocking rules earlier this year.

In January, China’s Ministry of Commerce published new rules designed to counteract extraterritorial application of other countries’ sanctions and export control laws. China has historically criticized Western nations for interfering in China’s internal affairs, but the blocking rule is based on the EU’s own blocking statute, which was passed in the 1990s to counteract new US sanctions on Iran, Cuba and Libya.

China’s blocking rule allows the Ministry of Commerce to designate certain trade restrictions as “unjustifiable” when Commerce determines they violate basic norms of international trade and unfairly restrict Chinese persons’ ability to do business in a third country (i.e. not China or the country that imposed the trade restriction). As this rule affects third countries, it would not apply to sanctions such as US sanctions of persons involved in Xinjiang, persons involved in Hong Kong, or companies designated as “Communist Chinese Military Companies” by the US Department of Defense.

China’s new law builds on these rules by allowing businesses that have been adversely affected by unjustifiable trade restrictions to sue in Chinese courts for damages based on that lost business. Moreover, individuals responsible for unjustifiable sanctions could have transactions blocked or assets seized by China. At this point, China has not initiated any enforcement actions based on the new law.