The Ministry of Commerce promulgated Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures (hereinafter referred to as the Rules) on 9 January, and these Rules will be effective as of the date of promulgation.

According to the Ministry of Commerce, this document was issued against the backdrop of “some countries promoting unilateralism, prohibiting relevant countries from trading with them, and even urging enterprises from other countries to cut economic and trade ties with relevant countries”, and it is obvious that they are targeting at China. However, “the issuance of the Rules will not change China’s international responsibility. According to international treaties that China has signed and participated in, the Rules shall not apply to cases involving extra-territorial application of foreign legislation and other measures”.

In terms of specific measures, five aspects are outlined in the Rules:

  1. Timely report. When a citizen, legal person or other organization of China finds unjustified extra-territorial application of foreign legislation and other measures, which means he/she/it is prohibited or restricted from engaging in normal economic, trade and related activities with a third state (or region), he/she/it shall report such matters within 30 days.
  2. Assessment and determination. When the working mechanism takes charge of the assessment and determination of unjustified extra-territorial application of foreign legislation and other measures, it shall take all factors (mentioned in the document) into consideration.
  3. Prohibition order. When the working mechanism, upon assessment, confirms that there exists unjustified extra-territorial application of foreign legislation and other measures, it may decide that the competent department of commerce of the State Council shall issue a prohibition order for foreign legislation and other measures.
  4. Judicial remedy. Chinese citizens, legal persons or other organizations may sue in domestic courts for damages for the improper extraterritorial application of foreign laws and measures.
  5. Punishment system. For violations of the obligation to report truthfully and failure to comply with the prohibition order, punishment should be impose

According to the Rules, the working mechanism shall assess and determine whether there exists unjustified extra-territorial application of foreign legislation and other measures; the working mechanism is composed of relevant central departments and led by the competent department of commerce of the State Council, and the specific matters are handled by the competent department of commerce and the Department of Development and Reform in conjunction with other relevant departments of the State Council. The document also mentions the content of assessment:

  1. Whether international law or the basic principles of international relations are violated.
  2. Potential impact on China’s national sovereignty, security and development interests.
  3. Potential impact on the legitimate rights and interests of the citizens, legal persons or other organizations of China.
  4. Other factors that shall be taken into account.

These assessments are broad in scope and more detailed rules are required to screen specific acts in practice. In addition, the working procedure for the assessment of the working mechanism is not stated in the document, and how to determine the extent of the damage and the response measures should be further clarified.

Related Chinese news: https://baijiahao.baidu.com/s?id=1688378630160241442&wfr=spider&for=pc

Click here for the translation of the Rules.