On 13 April 2026, the State Council of the People’s Republic of China promulgated the Regulations of the People’s Republic of China on Countering Foreign Improper Extraterritorial Jurisdiction, signed by Premier Li Qiang as State Council Decree No. 835 and effective immediately upon publication.

The Regulations represent an important step in China’s evolving countersanctions legal framework. They introduce new enforcement tools and provide greater procedural detail. This client alert outlines the key regimes and provisions established by the Regulations and the subsequent Ministry of Commerce of the People’s Republic of China (MOFCOM) blocking order.

Identification of foreign improper extraterritorial jurisdiction measures

Under Article 6, the department of rule of law of the State Council is responsible for identifying foreign improper extraterritorial jurisdiction measures, acting in conjunction with other relevant authorities. The identification process may include investigations and external consultations.

In carrying out the identification, the following factors must be comprehensively considered:

1. Whether the measures violate international law and the basic norms governing international relations
2. Whether the conduct subject to extraterritorial jurisdiction has an appropriate nexus with the foreign country asserting jurisdiction
3. Whether the measures harm China’s national sovereignty, security, and development interests, or infringe upon the legitimate rights and interests of Chinese citizens and organisations
4. Other factors deemed relevant

The open-textured nature of these criteria, particularly the “other factors” clause, preserves substantial administrative discretion. Once a measure has been identified as constituting improper extraterritorial jurisdiction, the department of rule of law of the State Council may issue a public announcement to that effect. Upon such identification, no organisation or individual may implement or assist in implementing the identified measure.

Countermeasures, restrictive measures, and the Malicious Entity List

Once a foreign measure has been identified, the following enforcement tools become available under the Regulations. First, under Article 7, the Chinese government may adopt countermeasures and restrictive measures across a broad range of policy fields, including diplomacy, exit and entry management, trade, investment, international cooperation, and foreign aid, in response to the identified measure.

Second, Article 8 establishes a Malicious Entity List mechanism. Relevant departments of the State Council may, in accordance with the decision-making procedures of the working mechanism, place the foreign organisations and individuals that promote or participate in the implementation of an identified measure on the Malicious Entity List. Listed entities and individuals may be subject to one or more of the following countermeasures and restrictive measures:

1. Refusal to issue a visa, denial of entry, cancellation of a visa, ordering departure within a prescribed time limit, repatriation, or deportation
2. Cancellation or restriction of the qualifications of relevant persons to work, stay, or reside within the territory of China
3. Sealing, impoundment, or freezing of movable property, immovable property, and other assets within the territory of China
4. Prohibiting or restricting organisations and individuals within China from providing data or personal information to them, or from conducting transactions, cooperation, or other activities with them
5. Prohibiting or restricting their import and export activities related to China
6. Prohibiting or restricting their investment within the territory of China
7. Prohibiting or restricting the entry of their products, means of transport, and other items into China
8. Imposing fines
9. Other necessary measures

Notably, the scope of these measures extends beyond the listed entity or individual. The Regulations provide that the above listed measures may also be applied to organisations that are (i) actually controlled by a listed entity or individual, or (ii) in whose formation or operation a listed entity or individual is involved. This extension significantly broadens the enforcement perimeter and may capture affiliated or subsidiary entities that are not themselves directly listed.

Prohibition Order

Third, and distinct from the general countermeasures described above, Article 13 empowers the department of rule of law of the State Council to issue a Prohibition Order addressed to a specific organisation or individual, prohibiting that party from implementing or assisting in the implementation of an identified foreign measure.

Enforcement actions, civil remedies, and penalties

The Regulations establish a multi-layered enforcement framework that contemplates concurrent administrative, civil, and potentially criminal exposure for non-compliance.

Administrative measures. Under Article 13, a relevant department of the State Council may conduct interviews with an organisation or individual that implements or assists in implementing an identified foreign measure, and may order the organisation or individual to take corrective action. This interview mechanism serves as an initial administrative enforcement step before more severe consequences are triggered.

Civil remedies. Article 14 introduces a private right of action: where any organisation or individual implements or assists in implementing an identified foreign measure, thereby infringing upon the legitimate rights and interests of a Chinese citizen or organisation, the affected party may institute proceedings before a people’s court seeking cessation of the infringement and compensation for losses. This civil remedy runs parallel to, and does not preclude, administrative enforcement.

Administrative penalties. Article 17 sets out a comprehensive suite of penalties for organisations or individuals that refuse to implement, or evade the implementation of, the countermeasures and restrictive measures as prescribed under the Regulations, or that violate a Prohibition Order. Available penalties include orders to take corrective action; prohibitions or restrictions on participation in government procurement and bidding; restrictions on the import and export of relevant goods and technologies or on international trade in services; restrictions on receiving data or personal information from outside China or providing such information to parties outside China; restrictions on exiting, entering, staying, or residing within the territory of China; and the imposition of fines.

Criminal liability. Finally, Article 18 provides that where any violation of the Regulations constitutes a crime under applicable PRC law, the violator shall be held criminally liable. While the Regulations do not themselves create standalone criminal offences, this provision makes clear that the most egregious conduct may attract criminal prosecution under existing PRC criminal law.

MOFCOM blocking order against U.S. sanctions on five Chinese enterprises

On 2 May 2026, MOFCOM issued a blocking order in response to U.S. sanctions imposed on five Chinese enterprises for allegedly participating in transactions involving Iranian oil. The affected companies are Hengli Petrochemical (Dalian) Refining Co., Ltd., Shandong Shouguang Lujing Petrochemical Co., Ltd., Shandong Jincheng Petrochemical Group Co., Ltd., Hebei Xinhai Chemical Group Co., Ltd., and Shandong Shengxing Chemical Co., Ltd.

According to MOFCOM, the sanctions, which place the companies on the Specially Designated Nationals list, freeze their assets, and prohibit transactions, constitute an improper extraterritorial application of foreign law.

Legal basis. The blocking order was issued pursuant to the National Security Law, the Foreign Relations Law, the Anti-Foreign Sanctions Law and its implementing regulations, and the Measures for Blocking Improper Extraterritorial Application of Foreign Laws and Measures.

Prohibitions. The order stipulates that Chinese citizens, legal persons, and organisations must not: (i) recognise U.S. sanctions against the five enterprises; (ii) enforce such measures within China; or (iii) comply with restrictions imposed under U.S. Executive Orders 13902 and 13846.

Policy considerations. MOFCOM emphasised that, since 2025, the United States has imposed sanctions on these Chinese enterprises, unlawfully prohibiting or restricting their normal trade and economic activities with third countries and parties. MOFCOM stated that such actions violate international law and the basic norms of international relations.

Broader implications. China reiterated its consistent opposition to unilateral sanctions lacking United Nations authorisation or a basis in international law. The blocking order is a concrete action under the Measures for Blocking Improper Extraterritorial Application of Foreign Laws and Measures, aimed at safeguarding national sovereignty, security, and development interests, while protecting the legitimate rights of Chinese citizens, enterprises, and organisations.

International obligations. MOFCOM clarified that the blocking order does not affect China’s fulfilment of international obligations, nor does it undermine the protection of the lawful rights and interests of foreign-invested enterprises in China.

Summary

The Regulations complement China’s existing countersanctions toolkit, including the Anti-Foreign Sanctions Law, Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures, and the Provisions of the Unreliable Entity List, consolidating the framework with broader enforcement reach and clearer procedural pathways.

The blocking order against U.S. sanctions on five Chinese petrochemical companies represents China’s latest step in countering the extraterritorial application of foreign laws. By prohibiting recognition, enforcement, and compliance with U.S. measures, China seeks to reinforce its stance against unilateral sanctions and provide legal protection for Chinese enterprises engaged in global trade.

Companies with China-nexus operations or counterparties should review their global sanctions compliance programmes, map potential exposure points under each of these regimes, and establish internal escalation protocols to address conflicts-of-law scenarios promptly.

Client Alert 2026-101