On April 7, 2026, the State Council of the People’s Republic of China promulgated the Regulation on Countering Unjustified Extraterritorial Jurisdiction by Foreign States (hereinafter referred to as the “Anti-Extraterritorial Regulation” or “Regulation”), which took effect on the same date. This regulation marks a new milestone in China’s efforts to counter foreign long-arm jurisdiction and establishes a systematic framework covering the identification, publication, blocking, countermeasures and remedies against unjustified extraterritorial measures imposed by foreign jurisdictions. Marking the first enforcement practice under the new Regulation, China’s Ministry of Justice ruled on 15 May 2026 that the EU’s cross-border probe into Nuctech under its Foreign Subsidies Regulation amounts to unjustified extraterritorial jurisdiction.
Constrained by EU legislations, including recent regulations related to Russia and labor compliance, many European companies may, out of internal compliance obligations, impose rigorous reviews, shift liabilities or even unilaterally terminate cooperation with their Chinese partners, either directly or through their Chinese subsidiaries. Against the backdrop of China’s continuously strengthened legal regime to counter improper extraterritorial jurisdiction, Chinese enterprises now have clear legal tools to respond to unfair measures from foreign governments and other entities. It is therefore essential for all domestic and foreign stakeholders to fully understand the rules set out under the newly effective Anti-Extraterritorial Regulation.
This article interprets the core provisions of the Regulation and puts forward preliminary assessments for European enterprises.
Risks & Criteria
Based on the four criteria stipulated in the Anti-Extraterritorial Regulation and prevailing international practices, we identify the following common scenarios that carry risks of being deemed unjustified extraterritorial jurisdiction:
- Secondary Sanctions
Issued by the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury, secondary sanctions mandate Chinese entities to terminate normal transactions with third countries or third parties. A recent example dates to 25 April 2026, when the U.S. government added a petrochemical enterprise in Dalian, China, to its Specially Designated Nationals (SDN) List, alleging it was a major purchaser of crude oil and petroleum products originating from Iran. - Excessive Data Collection
Demands under foreign domestic laws for access to sensitive information concerning Chinese enterprises’ domestic supply chains, client data, production layout or technical materials. - Discriminatory Trade Restrictions
Measures adopted pursuant to foreign domestic laws that require differential and discriminatory treatment against Chinese entities, such as exclusion from business cooperation, suspension of product supply and technical services, etc. For example, it is not uncommon to see foreign companies unilaterally terminate contractual relationships with Chinese partners over perceived sanction risks. Most recently, on May 19, the European Parliament approved new trade defense instruments, which will cut duty-free steel import quotas into the EU by 47% and raise tariffs on steel imports exceeding quotas from 25% to 50%. The move targets China’s alleged excess steel capacity, which the EU claims disrupts its domestic industry. Chian’s Ministry of Commerce has indicated that corresponding countermeasures will be rolled out once these new trade rules take effect.
The core objectives of the Anti-Extraterritorial Regulation can be summarized in three aspects: identifying what is the unjustified extraterritorial jurisdiction, blocking the enforcement of such measures, and imposing countermeasures against parties that initiate unjustified extraterritorial acts. From a practical perspective, the Regulation brings following mechanisms to Chinese enterprises:
- First, enterprises may apply to competent authorities for a formal ruling on whether a foreign measure constitutes unjustified extraterritorial jurisdiction, when receiving official requests for information disclosure or investigative cooperation from foreign governments and business partners, or when seeking legal grounds to decline such foreign requests.
- Second, competent authorities are empowered to issue prohibition orders (the “Prohibition Order”) to halt non-compliant assisting or enforcing activities.
- Third, a list of malicious entities (the “List of Malicious Entities”) has been established to impose targeted sanctions on foreign parties that instigate unjustified extraterritorial jurisdiction.
- Fourth, affected Chinese enterprises are entitled to initiate civil litigation to seek legal redress.
Impact on European Stakeholders
How exactly will these mechanisms impact European stakeholders? We elaborate on the implications below.
Given the complex and evolving geopolitical landscape worldwide, European companies are naturally required to comply with local laws and regulations. Restrictions imposed on their Chinese partners due to regional compliance obligations are understandable under current circumstances.
Nevertheless, European enterprises should take full account of the comprehensive response mechanism established by China under the Anti-Extraterritorial Regulation, even when taking restrictive actions against Chinese partners out of EU compliance requirements, whether acting directly or via their Chinese subsidiaries.
Under the new rules, Chinese enterprises subjected to external pressure have the right to report relevant circumstances to the Ministry of Justice and apply for official identification rulings. Where a measure or a requirement is confirmed as unjustified extraterritorial jurisdiction, Chinese enterprises are legally obligated to refuse compliance with foreign mandates and will be held liable if they choose to cooperate.
In addition, competent authorities may proactively investigate potential violations and adopt the following measures:
- Include foreign entities that initiate or participate in unjustified extraterritorial jurisdiction on the List of Malicious Entities. Targeted restrictions will then apply, including entry bans, seizure of onshore assets, prohibitions on new investments in China, suspension of import and export activities, and a ban on domestic entities providing data and personal information to listed parties.
- Issue Prohibition Orders targeting all relevant parties, both domestic and overseas, that assist in or carry out unjustified extraterritorial measures. The effect of such orders extends extraterritorially. The orders apply not only to Chinese partners pressured by European side to participate in investigations or disclose sensitive data, but also to local affiliates of European groups that act on instructions from their parent companies. Any act of assistance or implementation may be subject to these prohibitions. Any party, either inside or outside China, that violates a Prohibition Order will face a range of regulatory penalties, including restrictions on government procurement participation, import and export operations, cross-border data transmission, personnel entry and exit, as well as monetary fines.
Furthermore, the Anti-Extraterritorial Regulation provides a clear judicial remedy route. Chinese enterprises may file lawsuits in domestic courts against foreign governments, overseas companies and their onshore affiliates that impose unjustified extraterritorial jurisdiction, to claim compensation for resultant losses.
Summary
In short, Chinese enterprises have both the right and obligation under law to reject unjustified extraterritorial requirements and hold relevant parties accountable.
European companies should note that China’s robust legal framework against unjustified extraterritorial jurisdiction is fully enforceable. All parties, domestic or foreign, involved in initiating, assisting or implementing such measures will face regulatory actions covering trade, personnel mobility and property rights.
Against a volatile geopolitical backdrop, unilateral extraterritorial practices risk running afoul of China’s legal provisions. Pressuring Chinese partners in this regard will likely lead to legal disputes and disrupt bilateral cooperation. We hope parties will observe laws and regulations of both jurisdictions, resolve differences through dialogue, and refrain from resorting to coercive measures. This will help sustain sound and stable cooperation between China and Europe within a compliant framework.
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Sharon Hu
Senior Associate
