China’s New Laws Are Ensnaring Western Companies
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- China's Anti-Foreign Sanctions Law Article 12 gives Chinese parties a private right to sue foreign firms implementing foreign sanctions; the first case before the Nanjing Maritime Court in 2024 saw a Swiss counterparty withhold almost $12 million from a sanctioned Chinese offshore engineering contractor, prompting a vessel arrest and mediation after a U.S. exemption was secured.
- The Shanghai Maritime Court ruled against a Singaporean shipping firm in 2025 for refusing to deliver electronic goods to a Hong Kong manufacturer on the U.S. entity list; China's Supreme People's Court designated the case as one of six representative maritime precedents in June, signaling how similar disputes will be treated.
- Beijing triggered its Blocking Rules for the first time in May, barring five Chinese teapot refineries — including Hengli Petrochemical — from complying with U.S. sanctions on alleged Iranian oil purchases, deliberately targeting firms with limited U.S. financial exposure to test the rules without blowback.
- The Counter-Extraterritorial Regulation (2026) lets Beijing assert jurisdiction over foreign conduct with a "reasonable connection" to China; in May, China's Ministry of Justice issued its first determination, finding that the European Commission's anti-subsidy probe of Chinese security firm Nuctech amounted to improper extraterritorial jurisdiction.
- HY Energy Group sued Citigroup in a Shanghai court in February and JPMorgan Chase in a Beijing court a month later over $40.5 million in payments the banks froze citing U.S. sanctions risk — litigation that remains ongoing and illustrates the bind facing global banks.
- Beijing's approach mirrors Russia's playbook since 2020 of channeling sanctions disputes into regime-controlled courts that sidestep contractual arbitration clauses, positioning Chinese courts as the centerpiece of an economic lawfare strategy against Western extraterritoriality.
Why it matters: Multinationals now face simultaneous legal exposure: sued in Chinese courts for complying with U.S. sanctions, sanctioned in Washington for ignoring them. The precedent is already active — Citigroup and JPMorgan are defendants in suits over $40.5 million, and the Supreme People's Court has elevated one Article 12 ruling to a representative case, meaning future de-risking decisions by multinationals now invite countersuits in Beijing.
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