18 Jan 2021 Legal News: China Released Blocking Rules to Counteract US Long-arm Jurisdiction
1. China Released Blocking Rules to Counteract US Long-arm Jurisdiction
On January 9, 2021, the PRC Ministry of Commerce (the “MOFCOM”) announced the Rules on Blocking Unjustified Extraterritorial Application of Foreign Legislation and Other Measures (the “Blocking Rules”) with immediate effect.
This move is understood as China’s hits back against long-arm jurisdiction of foreign legislations, in particular for U.S. export control laws, U.S. economic sanction laws, U.S. anti-foreign corruption laws, and U.S. anti-money laundering laws, etc. which impose heavy compliance burden and commercial activity restriction on Chinese citizens, enterprises and other organizations from engaging in normal economic and trade activities with a third nation (or region) or its citizens or entities. For example, a Chinese company encountered a restriction of keeping importing technical materials from a Japanese company due to a potential US sanction.
It is also stipulated that foreign invested enterprises operating in China are equally subject to the Blocking Rules as domestic Chinese enterprises. The Blocking Rules specially deserve attention from multinational companies engaging international trade or investment activities because the enterprises’ compliance system and risk management might be significantly altered by the Blocking Rules.
Briefly, the blocking mechanism operates in this way:
1) Reporting Obligation: the concerned citizens, legal persons or other organizations (the “Chinese citizens or entities”) shall report any potential unjustified foreign legislation and measures;
2) Evaluation of Reporting: the Working Mechanism (see our explanations below) decides whether the reported foreign legislation and measures have unjustified application while keeping the matter confidential if requested by the Chinese citizens or entities;
3) Releasing Prohibition Order: once deciding the unjustified application exists, the Working Mechanism issues a prohibition order, which requires the unjustified foreign legislation and measures not to be accepted, executed or observed;
4) Sanctions and Exemptions: the concerned Chinese citizens or entities may face sanction (warning, rectification notice or penalties) if they fail to report or to comply with the prohibition order;
If the Chinese citizens or entities have difficulties to abide by the Chinese Prohibition Order, they are also entitled to apply for an exemption that can enable them not to abide by the Chinese Prohibition Order.
5) Judicial Remedy: the Chinese citizens or entities also may seek for civil damages from transaction counterpart through legal proceedings in PRC court due to the unjustified application of foreign legislation and measures.
We comprehensively present the regime in Blocking Rules in the below table for your kind reference:
Asiallians will keep a close eye on the implementation and practical metrics of the Blocking Rules and promptly update you in the subsequent newsletter.
2. China Released Foreign Investment Encouraged List 2020
On December 28, 2020, the National Development and Reform Commission (the “NDRC”) and the MOFCOM released the Catalog of Industries for Encouraged Foreign Investment 2020 Edition (the “2020 Encouraged List”) to replace the Catalog of Industries for Encouraged Foreign Investment 2019 Edition (the “2019 Encouraged List”).
The 2020 Encouraged List are updated as follows has expanded compared with the 2019 version:
It indicates more welcomed markets and more potential business opportunities for foreign investors in China.
Hereunder are a few outstanding examples:
3. Hainan Released Negative List 2020
On December 31, 2020, the NDRC and the MOFCOM rolled out the Special Administrative Measures for Foreign Investment Access in Hainan Free Trade Port 2020 edition (the “Hainan FTP Negative List 2020”) which will take effect on February 1, 2021.
To attract foreign investors, the Hainan FTP Negative List 2020 further liberalizes and facilitates foreign investment comparing with Special Administrative Measures for Foreign Investment Access in Pilot Free Trade Zones 2020 Edition which was rolled out on June 23, 2020 and took effect on July 23, 2020.
We summarize the outstanding changes for your reference:
Asiallians will monitor the implementation of Hainan FTP Negative List 2020 and all other preferential policies released recently in Hainan FTP for foreign investment.
Should you have any inquiry about the above legal news, please contact us at email@example.com. As always, Asiallians remains at your service and our teams are currently mobilized in all our offices in Mainland China, in Hong Kong and in Taipei.
1. Article 2 of the Blocking Rules
2. Article 15 of the Blocking Rules
3. Article 4 of the Blocking Rules
4. Article 5 of the Blocking Rules
5. Article 5 of the Blocking Rules
6. Article 14 of the Blocking Rules
7. Article 6 of the Blocking Rules
8. Article 7 of the Blocking Rules
9. Article 8 of the Blocking Rules
10. Article 9 of the Blocking Rules
11. Article 11 of the Blocking Rules
12. Article 12 of the Blocking Rules
13. Article 13 of the Blocking Rules
14. 22 provinces include the following:
Shaanxi, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei, Hunan, Guangxi, Hainan, Chongqing, Sichuan, Xinjiang, Xizang, Ningxia, Guizhou, Yunnan, Xizang, Shanxi, Gansu.
Feel free to contact firstname.lastname@example.org for more information.