Reed Smith Client Alerts

On 9 January 2021, the Ministry of Commerce of the People’s Republic of China (MOFCOM) published the ‘Rules on Blocking Unjustified Extraterritorial Application of Foreign Legislation and Other Measures’ (the Rules), which came into force on the same date.

In summary, the Rules grant the relevant PRC authorities certain powers to block the extraterritorial application of foreign laws and measures if it is considered that they unjustifiably prohibit or restrict Chinese citizens and organisations from engaging in “normal economic, trade and related activities” with another state, or a citizen or organisation of that state, in violation of international law and the basic principles of international relations.

Summary of the Rules

Blocking orders

Where a citizen, legal person or other organisation of China (Affected Person) is prohibited or restricted by foreign legislation or measures from engaging in “normal economic, trade and related activities” with another state or region, or its citizens, legal persons or other organisations, the Affected Person can report the matter to the relevant Chinese authorities within 30 days of the situation arising (Article 5).

MOFCOM will take the lead in establishing a government working task force, comprising the National Development and Reform Commission and other central government ministries, to assess the extraterritorial application of such foreign legislation or measures, and in doing so will take into account (Article 6):

  1. whether “international law or the basic principles of international relations” have been violated;
  2. the potential impact on “China’s national sovereignty, security and development interests”;
  3. the potential impact on the legitimate rights and interests of China’s citizens, legal persons and other organisations; and
  4. any other relevant factors.

Where it is determined that the extraterritorial application of the foreign legislation or measure is unjustified, MOFCOM will issue a blocking order to prohibit its application (Article 7).

Under the Rules, an Affected Person may apply for exemption from compliance with a blocking order issued by MOFCOM, but foreign companies may not apply for any exemption to the blocking order (Article 8).