1. Affirmation of China’s Extraterritorial Jurisdiction

The Regulations, for the first time, expressly affirm that China has the authority, pursuant to Chinese laws and international treaties, or in accordance with the principle of reciprocity, to take extraterritorial jurisdiction measures with respect to conduct that has an appropriate connection with China (Article 4). However, please note this is an empowering provision on justified extraterritorial jurisdiction, rather than the basis for countering long-arm jurisdiction. The legal basis for countering long-arm jurisdiction is found in other provisions of the Regulations.

2. Scope of Application of Countermeasures

Unlike the previous Regulations on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures (the "Blocking Regulations"), which only provided for possible blocking of long-arm jurisdiction affecting normal economic and trade activities between Chinese parties and third-country parties, the Regulations are not so limited. The Regulations apply to all measures and acts of long-arm jurisdiction.

However, according to Article 19, paragraph 2 of the Regulations, where a foreign state unjustifiably prohibits or restricts normal economic and trade activities between Chinese parties and parties from a third country or region, the matter shall still be handled first in accordance with the Blocking Regulations.

3. Identification, Announcement, and Prohibition Orders

Although the Regulations counter long-arm jurisdiction measures outside the scope prescribed by the Blocking Regulations, given the double-edged nature of blocking measures, it can be seen from the design of blocking and penalty measures that the legislators have carefully coordinated the relevant mechanisms, so as to minimize or reduce, as far as possible, the impact of countermeasures on enterprises and even on the economy. The buffering tools used include mechanisms such as identification, announcement, consent to execution, and prohibition orders. These tools are important risk nodes for enterprises.

(1) Identification, Announcement and Consent to Execution

The announcement following identification is the starting point at which specific unjustified extraterritorial jurisdiction measures of foreign states are blocked. After the department in charge of legal affairs under the State Council, together with relevant departments, conducts identification, if it considers that the relevant measures constitute long-arm jurisdiction, it may make an announcement. Please note that the legislative wording here is "may" make an announcement, which means that, for some long-arm jurisdiction measures, the government may also choose not to make an announcement. Whether to make an announcement involves considerable deliberation. However, once an identification announcement is made, with respect to the specific unjustified foreign measures announced, no party may execute or assist in their execution.

After an announcement has been made, where an enterprise, due to special circumstances, truly needs to execute or assist in the execution of the relevant measures, it may apply to the department in charge of legal affairs under the State Council and, upon consent, may execute them within a specific scope. This means that, after the announcement is issued, the enterprise's primary task is not immediately to "take sides", but rather to assess whether compliance with the announcement may cause catastrophic or material adverse consequences to itself, so as to consider whether to apply for governmental consent to execute the long-arm jurisdiction measures.

It should be noted that, in the absence of separate governmental consent, although executing or assisting in the execution of long-arm jurisdiction measures does not result in administrative penalties, the enterprise may face the risk of claims and lawsuits brought by enterprises in China that suffer damage as a result.

(2) Prohibition Orders

The Prohibition Order is the point at which enterprises assume administrative liability. Article 13 of the Regulations provides that, with respect to organizations and individuals that execute or assist in the execution of long-arm jurisdiction measures, the competent authorities may first conduct regulatory interviews and order rectification, and may also issue a Prohibition Order; of course, they may also decide not to issue a Prohibition Order. This depends on the circumstances of the enterprise in the individual case, as well as the impact on the industry and even on macroeconomic security.

A Prohibition Order targets the specific act of execution or assistance in execution by the enterprise, rather than the long-arm jurisdiction measure itself. The premise for an enterprise to be subject to administrative penalties or administrative handling is that the enterprise continues to violate the Prohibition Order after being subject to it.

Violation of a Prohibition Order may trigger consequences including prohibition or restriction of government procurement, bidding and tendering, import and export, international trade in services, cross-border data transfers, exit and entry of personnel, flows of personal information, and fines. Compared with the Blocking Regulations, the consequences of a Prohibition Order are more specific and have broader impact, affecting enterprises’ domestic and cross-border supply chain activities.

In short, with respect to long-arm jurisdiction measures identified and announced by the government, enterprises still have buffering space, including applying for execution, making representations to the government, and avoiding a Prohibition Order.

4. Malicious Entity List

Article 8 of the Regulations provides for the Malicious Entity List, which targets foreign organizations and individuals that promote the implementation of, or participate in the implementation of, long-arm jurisdiction measures, and is generally limited to foreign politicians, think tanks, scholars, advisers, or certain political organizations, and is generally not directed at commercial enterprises.

However, enterprises and individuals in China should pay attention to the content of restrictive or prohibitive measures announced in respect of entities already included in the Malicious Entity List, so as to avoid violating such list announcements by having dealings with such entities, or with organizations controlled, established or operated by such entities; otherwise, they may face the same consequences as those for violation of a Prohibition Order.

5. Risk of Being Sued in China

According to Article 14 of the Regulations, where any organization or individual executes or assists in the execution of long-arm jurisdiction measures, thereby infringing upon the lawful rights and interests of Chinese citizens or organizations, Chinese citizens or organizations may bring a lawsuit before a people’s court in accordance with law, requesting cessation of the infringement and compensation for damages.

6. Enterprise Compliance Considerations

The countermeasures under the Regulations are directed at the promoters and executors of the long-arm jurisdiction measures identified and announced.

(1) Overseas Enterprises: Avoid Becoming Promoters, Participants or Executors of Long-arm Jurisdiction Measures

For overseas enterprises, the compliance focus is to avoid becoming promoters, participants or executors of long-arm jurisdiction measures. Where an overseas enterprise, due to compliance with foreign export controls, economic sanctions or other restrictive measures, takes measures against Chinese parties such as refusing transactions, stopping supply, freezing payments, terminating contracts, restricting accounts, disclosing data, assisting overseas investigations, or cutting off supply chains, it needs to assess in advance whether the relevant foreign measures may be deemed by China to constitute extraterritorial jurisdiction measures, and whether the enterprise’s own conduct may constitute conduct that promotes, participates in or executes such long-arm jurisdiction.

(2) Enterprises in China: Avoid Becoming Executors of Long-arm Jurisdiction Measures

For enterprises in China, the compliance focus is to avoid executing long-arm jurisdiction measures.

Enterprises in China should proactively assess whether there is any announcement risk, whether it is necessary to report the situation to the competent authorities, and whether they may adopt alternative performance, risk mitigation or exception-application arrangements. In daily operations, they should retain complete factual records, internal approval procedures, risk assessment opinions and damage-mitigation measures, for use in administrative investigations, civil disputes or subsequent applications for exceptions.

Enterprises in China that suffer harm as a result of a counterparty's execution of long-arm jurisdiction measures may also use the Regulations as a tool to protect their own rights and interests. For example, they may consider submitting suggestions to the department in charge of legal affairs under the State Council for identification pursuant to Article 6, and, after the relevant foreign measures are identified as unjustified extraterritorial jurisdiction measures, they may also request the counterparty to cease the infringement and compensate for damages pursuant to Article 14.