First Injunction Order on Unjustified Extraterritorial Application of Foreign Legislation

In recent years, due to trade disputes and geo-political tension, compliance with foreign export control and sanction rules as well as China's possible countermeasures become one of the key concerns for MNCs having operation in China. On April 7, 2026, the State Council of PRC issued the Regulations of the People's Republic of China on Countering Foreign Countries' Unlawful Extraterritorial Jurisdiction (the "State Council Countering Regulation"), which is the latest Chinese legislation in this area. Since then, we have already seen a few articles introducing the contents and impact of this new legislation on the internet.

 

On May 2, 2026, the Ministry of Commerce of PRC issued an injunction order to prohibit the recognition, execution and observation of the US sanctions on 5 Chinese entities. This is the first injunction order issued by the Chinese government to officially block the extraterritorial application or the so-called  "long-arm jurisdiction"  of relevant US sanction rules.

 

Interestingly, this first injunction order was not issued under the latest State Council Countering Regulation but was based on a department rule named "Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures" which was published by the Ministry of Commerce on January 9, 2021 ("MOFCOM Counteracting Rules").

 

The chart below is a comparison of the major clauses of the State Council Countering Regulation and the MOFCOM Counteracting Rules:

 

	State Council Countering Regulation (Admin Regulation)	MOFCOM Counteracting Rules (Departments Rules)
Applicable Situations	A foreign state, ……, implementing unlawful extraterritorial jurisdiction measures that endanger China’s national sovereignty, security or development interests, or infringe the lawful rights and interests of Chinese citizens or organizations	Extraterritorial application of foreign laws and measures …… in which any Chinese citizen, legal person or other organization is improperly prohibited or restricted from conducting normal economic and trade activities and relevant activities with any third country (region) or its citizen, legal person or other organization
Target	Foreign organizations or individuals that promote or participate in implementing unlawful extraterritorial jurisdiction measures Any organizations or individuals that enforce or assist in enforcing such measures	Party complies with the injuncted foreign laws and measures, resulting in infringement upon the legitimate rights and interests of a Chinese citizen, legal person or other organization
Countermeasures	Countermeasures in areas including diplomacy and foreign affairs, exit and entry, trade, investment, international cooperation, foreign aid, etc. Public Announcement on any measures identified as unlawful extraterritorial jurisdiction measure and no organization or individual shall implement or assist in the implementation of such measures Malicious Entities List Issuing the Prohibition Order	Injunction Order to prohibit the recognition, execution or observation of the relevant foreign laws and measures
Legal Consequences	Immigration and entry controls; limitation on personal work and residence qualifications; property seizure and freezing; prohibition/restrictions on providing data or personal information or related transactions and cooperation; prohibition/restriction on import and export; prohibition/restriction on investment activities; prohibition/restriction on entry of relevant goods and vehicles; imposing fines; and other necessary measures A Chinese party may file a lawsuit in China against any organization or individual implements or assists in the implementation of any unlawful extraterritorial jurisdiction measures which infringes the legal rights and interests of this Chinese party and requests the cessation of the infringement and compensation Criminal liability where violation constitutes a criminal offense.	A Chinese party, who suffers lost due to any party complies with the injuncted foreign laws and measures, may file lawsuit at a Chinese court against such party for compensation; A Chinese party, who suffers lost due to any judgement or ruling based on the injuncted foreign laws and measures, may file lawsuit at a Chinese court for compensation against any party who benefits from such judgement or ruling.

 

From the above chart, readers may notice that the applicable situations, countermeasures and the legal consequences under the State Council Countering Regulation are much severer than those under the MOFCOM Counteracting Rules. For example, since the current injunction order is issued under the MOFCOM Counteracting Rules, any MNCs who implements the injuncted US sanction rules would face potential civil lawsuits in China with liability for compensation, but will not be subject to the legal consequences under the State Council Countering Regulation, including fines, listing in the Malicious Entities List or even criminal liabilities.

 

We are of the opinion that this may be a decision of the Chinese government after careful consideration. On the one hand, by starting from a lower-level department rule, this first injunction order is not aiming to immediately "shock" the impacted entities. The relevant parties including MNCs can digest the message and explore a possible solution with the Chinese government. On the other hand, it will provide more flexibility to the Chinese government on the enforcement of the injunction order and, depending on the reaction of the US government, deciding on the next steps.

 

Nevertheless, the issuance of this first injunction order symbolizes that the Chinese countermeasure legislations are no longer plain legal terms on paper. It is now a realistic factor which must be considered in the global compliance framework of MNCs.

 

 

Author & Contact

 

Xuan CHE 
Partner, Beijing
xuan.che@dentons.cn
 

 

 

Linyi CAO
Paralegal, Beijing
linyi.cao@dentons.cn
                 

 

 

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