CHINA | Stop Acting Against National Interests

On 10 June 2021, the Standing Committee of the National People’s Congress (“NPC”) adopted the Anti-Foreign Sanctions Law of the People’s Republic of China.

The Anti-Foreign Sanctions Law (‘AFSL’) establishes the regulatory framework for foreign persons, both legal entities and individuals, acting against China’s national interests.

For foreign companies and individuals working in or with China, AFSL significantly impacts external communications and public relations.

Previously, several fashion multinationals faced criticism in China for boycotting cotton produced in Xinjiang province. Under the AFSL, such business conduct could constitute organisations directly or indirectly involved in discriminatory restrictive measures against Chinese organisations. In such instances, the company, senior management, and affiliated individuals could face sanctions and penalties in China.

Therefore, China-related marketing and communications should be risk assessed -especially multinationals with reputations at stake. Below, we highlight the significant impacts on businesses working in or with China.

Objectives

AFSL focuses on two main objectives: safeguarding national sovereignty, security, and development and protecting the legitimate rights of Chinese citizens and organisations.

AFSL provisions the right to take corresponding countermeasures to any foreign country that conducts the following:

  • violates internal laws and the basic norms of international relations and
  • uses various pretexts or according to its laws contain or suppress China and
  • takes discriminatory restrictive measures against Chinese citizens and organisations or interferes in China’s internal affairs.

Sanction List

The AFSL extends to organisations, individuals, and affiliated individuals who directly or indirectly participate in formulating, deciding, and implementing discriminatory restrictive measures against China. Such organisations and individuals shall be included in a Sanctions List (“List”) and subject to penalties.

For individuals and affiliated individuals included in the List, the AFSL defines as below:

  • The spouse and direct lineal family members of the individuals included in the List;
  • The senior executives or actual controller or the organisations included in the List;
  • The organisations in which the individuals included in the List serve as a senior executive;
  • The organisations which the individuals or organisations included in the List actually control or participate in their establishment and operation.

Therefore, the extension could directly affect individuals and organisations indirectly involved. We recommend developing a contingency plan for organisations and individuals since those listed can face restrictions in China and involvement with Chinese organisations and individuals.

Penalties

Dependent on the actual circumstances, listed organisations and individuals can face the following penalties:

  • refused visa, banned entry into China, invalidated visa and deportation
  •  sealed, seized, and frozen movable, immovable, and other types of property in China;
  •  prohibited or restricted from conducting related transactions, cooperation, or other activities with domestic organisations or individuals; and
  • other necessary measures.

The listed penalties are non-exhaustive and subject to the actual circumstances. Equally, though there are no extra-territorial measures explicitly stipulated in the AFSL, the restrictions of visa application and conducting related transactions, co-operations, and other activities with both domestic and individuals can subject violators outside of China to penalties – visa restrictions, doing business with domestic Chinese companies and so forth.

Mandatory Implementation of Countermeasures

Organisations and individuals in China are required to implement any government countermeasures adopted by the relevant departments of the State Council. Any organisations or individuals who fail to implement or cooperate with such countermeasures will be investigated.

Equally, an organisation shall not implement or assist in implementing discriminatory restrictive measures undertaken by a foreign country against a Chinese citizen or organisation. Such Chinese citizens or organisations could file a lawsuit to the People’s Court to request to cease infringement and compensation for any loss.

The AFSL follows from the China Export Law and the Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation and Other Measures effective from 1 December 2020 and 9 January 2021, respectively (“Laws’).

The enacted Laws establish a strict stance against foreign economic sanctions against Chinese organisations and individuals.

Conclusion

Though some may view the Laws as a restriction, the Laws reflect strong protection of national sovereignty and interests. For many companies risking external mishaps such as insensitive cultural marketing or recognition of Taiwan as a country could lead to severe legal and economic impacts. Therefore, companies shall implement policies to mitigate risks for the company and individuals.

Contact Us

If you have questions or concerns on Anti-Foreign Sanctions Law, please contact us at talktous@horizons-advisory.com to schedule a consultation session. Horizons can provide insight, expertise and the right solutions for you.