China’s new sanctions law poses a ‘legal dilemma’ for European companies present in the Asian country, according to MERICS institute.
On June 10, the Standing Committee of the National People’s Congress approved a new sanctions law, which provides China with a legal framework to counter punitive legal measures by external actors.
The sanctions law was developed as a response to American measures targeting Chinese entities, yet it would apply to European and other actors. The retaliatory measures deployable under the law align with the countersanctions imposed by China in March on the EU and other actors.
According to MERICS, European companies will find article “12 particularly challenging, as it forbids organizations and individuals to ‘enforce or assist in enforcing the discriminatory restrictive measures employed by foreign nations against our nation’s citizens or organizations’”.
“Failure to comply may result in companies being forced to compensate any losses to Chinese entities but the vagueness of the article leaves room for more interpretation”, it adds.
According to MERICS, “it remains to be seen how the law will be implemented and whether it will extend to what China considers ‘politically sensitive’ European regulations”.
The sanctions law, it adds, “provides China with the legal foundation for both retaliatory responses and offensive measures” and “is a part of a wider effort by Beijing to create legal tools to fend off external pressures and build up its capacity to use lawfare”.
Countersanction regulations have also been created at the level of the Ministry of Finance, along with the publication of a list of unreliable companies.
“So far Beijing has not put these measures into practice, but should it decide to enforce the new law, companies may find abiding the European or US regulations incompatible with the new Chinese legislation”, MERICS adds.
