China issues new countering improper extraterritorial jurisdiction regulations

On April 7, 2026, the State Council of the People's Republic of China issued the Regulations on Countering Improper Extraterritorial Jurisdiction by Foreign States (the "Regulations"), which entered into force on the same date. ¹

The Regulations establish a formalized legal framework for identifying and responding to foreign laws, regulations, and enforcement actions that PRC authorities identify as "improper exercises of extraterritorial jurisdiction". The rules build on, and are designed to operate alongside, China's existing blocking statutes against  foreign sanctions and trade restrictions, including the Anti‑Foreign Sanctions Law, the Export Control Law, and  Rules on Blocking the Unjustified Extraterritorial Application of Foreign Laws and Measures issued by Ministry of Commerce of the People's Republic of China ("MOFCOM"). ²

In summary, the Regulations:

• authorize PRC authorities to assess whether foreign legislation or an enforcement action has an improper extraterritorial effect on China‑related activities;
• establish mechanisms to restrict or prohibit Chinese entities from complying with such foreign measures;
• provide for countermeasures, including listing and sanctions‑style responses, against foreign entities and individuals involved; and
• enable affected Chinese entities to seek civil remedies in PRC courts.

Scope of “Improper Extraterritorial Jurisdiction”

The Regulations apply where PRC authorities determine that a foreign legislation or enforcement action ("foreign measures")—such as sanctions, export controls, or similar restrictive measures—constitutes an improper exercise of extraterritorial jurisdiction that any individuals or organizations are prohibited from enforcing or assisting the enforcement of such foreign measures.

In making this determination, PRC authorities may consider factors, including:

• conformity with international law and norms governing international relations;
• whether a sufficient jurisdictional nexus exists;
• impacts on China's sovereignty, security, or development interests; and
• adverse effects on the lawful rights and interests of Chinese entities.

The Regulations do not enumerate specific foreign measures deemed "improper," leaving the designation to future administrative determinations and enforcement practice. Pursuant to the Regulations, China's Ministry of Justice ("CNDOJ") is the competent judicial department under the State Council, and will take the lead role in identifying and announcing whether a foreign measure is found with "improper extraterritorial jurisdiction" and should be subject to a prohibition order. The Regulations also provide exception for Chinese individuals and entities to comply with a prohibited foreign measure, subject to the approval from CNDOJ and within specific scope on case-by-case scenario.

Malicious Entities List 

Foreign organizations and individuals may be designated as "malicious entities" if they are found to have promoted, implemented, or participated in improper foreign extraterritorial measures. Designation may trigger countermeasures under the Anti‑Foreign Sanctions Law framework, such as seizing or freezing assets in China, prohibition or restriction on data export from China or investment within China, prohibition or restriction on import or export activities relating to China, among others. These measures may also extend beyond the designated entity itself to affiliates that the designated entity owns, controls, or operates—creating the potential for group‑wide exposure, consistent with the approach under Article 15 of the Regulations on the Security of Industrial and Supply Chains.³

Civil Remedies for Impacted Chinese Entities

Alongside administrative countermeasures, the Regulations permit impacted Chinese entities to seek civil relief in PRC courts.  Available remedies may include injunctive relief and compensation for losses suffered as a result of compliance with improper foreign extraterritorial measures.

This private‑law enforcement mechanism exposes multinational companies operating in China, or dealing with Chinese counterparties, to additional liability risk.

Practical Takeaways

Companies may wish to consider the following points moving forward: 

• Compliance and due diligence considerations. The Regulations, read together with China's other existing countermeasure mechanisms, may compound the difficulties facing foreign entities that maintain operations in China or commercial relationships with Chinese counterparties. Where a foreign measure is deemed an "improper" exercise of extraterritorial jurisdiction under the Regulations, a foreign entity may not be able to rely on its obligations under such foreign measure as justification for suspending or terminating an existing commercial relationship with a Chinese counterparty nor (in cases where a Chinese counterparty has previously covenanted to comply with foreign measures) rely on a Chinese counterparty to continue to be bound by such compliance requirements. At the same time, a Chinese counterparty that has agreed to comply with foreign sanctions or other foreign-law requirements may be placed in a difficult position if those obligations conflict with Chinese law. Depending on the governing law, dispute resolution forum, and the absence of contractual carve-outs for local-law compliance, the Chinese counterparty may have to choose between complying with Chinese law and breaching its contractual obligations, with potential exposure to contractual penalties or other remedies; 
• Continued Monitoring: Multinational companies should monitor developments under both regimes and carefully assess how to manage potentially conflicting compliance obligations in different jurisdictions;
• Contractual and policy drafting. Sanctions clauses, information‑sharing provisions, and termination rights in commercial contracts should be reviewed for China‑law carve‑outs, internal escalation mechanisms, and coordinated risk‑management procedures, taking into account potentially conflicting legal requirements in other jurisdictions. Depending on the client's risk allocation objectives, one possible approach is to place the burden of managing the compliance dilemma on the counterparty through carefully drafted covenants, while limiting any local-law carve-outs and preserving contractual remedies where appropriate. The appropriate drafting position will depend on the governing law, dispute resolution forum, enforcement considerations, and the parties' relative leverage; and
• Contingency and escalation planning. These developments should be factored into supply‑chain restructuring, significant transactions, cross‑border data transfers, decisions to suspend supply or services, and adjustments to after‑sales support and maintenance.

_{1 Regulations on Countering Improper Extraterritorial Jurisdiction by Foreign States (《中华人民共和国反外国不当域外管辖条例》) (promulgated by the State Council, Apr. 7, 2026, effective Apr. 7, 2026).
2 Law of the People's Republic of China on Countering Foreign Sanctions (《中华人民共和国反外国制裁法》) (adopted Jun. 10, 2021, effective Jun. 10, 2021); Export Control Law of the People's Republic of China (《中华人民共和国出口管制法》) (adopted Oct. 17, 2020, effective Dec. 1, 2020); MOFCOM's Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures (《阻断外国法律与措施不当域外适用办法》) (adopted Jan. 9, 2021, effective Jan. 9, 2021).
3 Regulations on the Security of Industrial and Supply Chains (《国务院关于产业链供应链安全的规定》) (promulgated by the State Council, Order No. 834, Mar. 31, 2026, effective Mar. 31, 2026).
4 We note one publicly reported case in which a Chinese firm brought a private civil action under Article 12 of the Anti‑Foreign Sanctions Law ("AFSL") seeking damages. Article 12 allows Chinese citizens and organizations to sue any organization or individual that enforces or assists in enforcing foreign discriminatory restrictive measures, where such conduct infringes upon their legitimate rights and interests, including claims against Chinese parties and third‑country actors to cease the infringement and recover losses.}  

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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