By Cecilia Zhu, Lehman, Lee & Xu
Times are changing and foreign businesses must continue to keep abreast of a wide range of laws, polices, and regulations. One such law is China’s Anti-Foreign Sanctions Law which is “on the books” but not discussed much. Let us take a closer look at the law and outline how a company might proactively remain complaint in light of all the challenges in operating in the world’s second largest economy.
Executive Summary:
In this legal article, lawyers at Lehman, Lee & Xu provide an extensive examination of China’s Anti-Foreign Sanctions Law (AFSL) and its far-reaching implications for individuals and organizations. With the AFSL granting the Chinese government authority to retaliate against foreign sanctions, this article delves into the legislative background, affected parties, counter-measure target list, and potential consequences. Furthermore, an actionable plan is presented to guide organizations in ensuring compliance with China’s anti-sanctions law.
Introduction:
China’s recent enactment of the Anti-Foreign Sanctions Law (AFSL) on June 10, 2021 has sparked considerable interest and concern. This article seeks to unravel the complexities surrounding the AFSL by providing a comprehensive Q&A analysis. By addressing various key aspects of the law, readers will gain valuable insights into its legislative background, its impact on different entities, the counter-measure target list, and the necessary steps organizations can take to remain compliant.
Q&A Analysis:
Q1: What is the legislative foundation of the AFSL?
A1: The AFSL aims to counter foreign actions that interfere with China’s internal affairs and employ discriminatory measures against Chinese individuals and organizations. To understand its enforcement, it is crucial to recognize its focus on countering targeted sanctions specifically.
Q2: Which sources form the legal basis for the AFSL?
A2: The primary sources for the AFSL are as follows:
– Anti-Foreign Sanctions Law of the People’s Republic of China (《中华人民共和国反外国制裁法》), issued on June 10, 2021. (Chinese version available at http://www.npc.gov.cn/npc/c30834/202106/d4a714d5813c4ad2ac54a5f0f78a5270.shtml)
– English translation of the Anti-Foreign Sanctions Law, provided for reference.
Q3: Which entities are affected by the AFSL?
A3: The AFSL affects three distinct categories of entities:
(i) Entities involved in formulating, deciding, or adopting targeted sanctions.
(ii) Entities involved in executing or assisting in the implementation of targeted sanctions.
(iii) Entities that fail to comply with the Chinese government’s counter-measures.
Q4: What are the consequences for entities involved in formulating targeted sanctions?
A4: Entities falling into this category may be included in the counter-measure target list. Consequently, the Chinese government can impose various sanctions, such as entry denials, asset freezes, transaction restrictions, and other necessary measures.
Q5: What are the repercussions for entities executing or assisting with targeted sanctions?
A5: Entities in this category may not face direct counter-measures. However, they may be held civilly liable for damages caused to affected Chinese individuals or organizations due to their compliance with foreign targeted sanctions.
Q6: How are entities failing to comply with Chinese counter-measures affected?
A6: Entities failing to comply with counter-measures may face legal liabilities and encounter restrictions on related business activities. The specific consequences depend on the enforcement jurisdiction of the Chinese government and may encompass unestablished legal liabilities.
Q7: What constitutes the counter-measure target list?
A7: The counter-measure target list encompasses entities involved in formulating targeted sanctions, along with their affiliates, such as spouses, immediate family members, senior management personnel, and controlled entities. Being listed exposes them to potential sanctions and restrictions.
Q8: How are counter-measures imposed and reviewed?
A8: Various ministries within the Chinese government hold the authority to impose specific counter-measures on entities listed in the AFSL. The decisions of these ministries are final and not subject to administrative or judicial review. However, counter-measures may be suspended, changed, or terminated if circumstances warrant it.
Action Plan for Compliance:
1. Stay Informed: Organizations must stay updated on developments, amendments, and official announcements related to the AFSL. Consult legal experts to ensure a thorough understanding of the evolving compliance requirements.
2. Conduct Internal Assessments: Evaluate existing business operations, contracts, and partnerships to identify any potential risks or conflicts with the AFSL. Implement internal controls and policies to align with the law’s provisions.
3. Establish Communication Channels: Maintain open lines of communication with Chinese authorities and relevant stakeholders. Seek clarification or guidance when uncertainties arise, ensuring a proactive approach to compliance.
4. Review Contracts and Agreements: Carefully review existing contracts with Chinese counterparties to ensure compliance with the AFSL. Consider incorporating specific provisions related to sanctions and exemptions to mitigate potential liabilities.
5. Train Employees: Provide comprehensive training programs to employees, particularly those engaged in activities subject to the AFSL. Foster awareness and understanding of compliance obligations to minimize risks.
Conclusion:
China’s Anti-Foreign Sanctions Law represents a significant development in the global regulatory landscape. Understanding its legislative context, affected entities, and counter-measure mechanisms is crucial for organizations conducting business in or with China. By proactively embracing compliance measures, organizations can navigate this complex legal framework while safeguarding their interests and ensuring adherence to China’s anti-sanctions law.
If you have any questions please direct same to
www.lehmanlaw.com
or author Cecilia Zhu
czhu@lehmanlaw.com