The current international business environment is no longer dominated solely by traditional diplomatic means or bilateral trade policies. Economic sanctions, export controls and their derivative countermeasures have become core tools in the political, economic and legal contests between nations.
Senior Partner
Wintell & Co
Tel: +86 136 0165 2399
Email: mervyn.chen@wintell.cn
Amid ongoing geopolitical tensions, China enacted the Anti-Foreign Sanctions Law in 2021, and in March 2025 the State Council promulgated the Provisions on the Implementation of the Anti-Foreign Sanctions Law. This supporting administrative regulation comprises 22 articles that specify the scope of application, initiation procedures and enforcement mechanisms for countermeasures, and strengthen departmental co-ordination and enforcement rigidity.
Together with the National Security Law, the Law on Foreign Relations, the Foreign Trade Law, the Unreliable Entity List system, and the Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures, these form the basic framework of China’s anti-sanctions legal system.
For multinational companies, whether foreign-invested enterprises establishing regional headquarters in China or Chinese enterprises that have “gone global” and are deeply engaged in international competition, the traditional model of headquarters-led, unified global compliance policy is facing severe challenges. Previously, compliance frameworks were often based on the laws of the headquarters’ jurisdiction, regulating global operations in a standardised and centralised manner to achieve risk control.
Partner
Wintell & Co
Tel: +86 186 2183 4731
Email: vicky.wang@wintell.cn
However, changes in the legal environments of various countries have directly impacted this model. For example, article 12 of the Anti-Foreign Sanctions Law explicitly prohibits the “implementation or assistance in the implementation” of unilateral discriminatory sanctions imposed by foreign countries within China.
If a multinational group’s global compliance policy stipulates that “business activities and transactions must comply with US sanctions laws and policies” or similar language, this may, in Chinese judicial practice, be deemed as the parent company instructing its Chinese subsidiary to violate Chinese law, triggering potential legal and compliance risks.
Therefore, in this complex and conflicting international environment, future adjustments to compliance mechanisms and policies in the field of economic sanctions for multinational enterprises may be based on the “principle of territoriality” and “risk prevention”, with greater emphasis on “dynamic adjustment and balance”.
A cross-border litigation case handled by the author also reflects the above-mentioned complexity and challenges. A global shipping company (company A) accepted a booking from a Chinese shipper (company B) to transport a batch of goods from a Chinese port to a Panamanian port.
After accepting the order, company A discovered that a related entity of company B was suspected of being included on a US sanctions list and, therefore, by its internal compliance policy suspended the shipment. However, after the freight forwarder and the cargo-interested parties provided a letter of indemnity for the amendment of the bill of lading, the goods were eventually loaded and shipped.
Company A’s headquarters again identified unresolved sanctions risks related to the shipment and initiated an internal compliance investigation, requiring the shipper to disclose the final destination and end-users’ information. The shipper refused to co-operate, and company A decided to terminate the shipment.
The shipper then applied to a Chinese maritime court for a maritime injunction, which was granted. However, before the Chinese court’s ruling was issued, company A, by its group compliance policy, returned the goods to China. Due to prolonged detention at the port, the goods suffered significant devaluation. The shipper subsequently sued company A in a Chinese maritime court under Chinese law, seeking full compensation for all losses.
Although the case has not yet been adjudicated, it has provided valuable insights for the “path of balance” for multinational enterprises.
First, the shipping industry is highly internationalised, and companies often face legal challenges from multiple jurisdictions, especially as global carriers are subject to regulation by several countries. If a company relies excessively on a single, headquarters-driven “red line” sanctions policy, it is prone to rigid enforcement and risk spillover.
Second, when dealing with complex sanctions risks, compliance policies should be designed and implemented with “risk prevention and mitigation” as the core objective, rather than being solely compliance-oriented.
In particular, careful consideration should be given to whether, after obtaining a judgment or ruling with binding force from a national court, the original compliance policy should still be mechanically enforced. If a company continues to perform its obligations by a court ruling, it can reduce the risk of violating foreign economic sanctions policies.
Third, in the current environment, the wording and detailed arrangements of clauses in transport contracts regarding applicable law, dispute resolution and force majeure are especially important. When operating globally, multinational enterprises should fully embed flexible mechanisms for addressing legal conflicts across multiple jurisdictions into contract design and standard operating procedures.
In summary, multinational enterprises must go beyond passive compliance to build dynamic, proactive systems that balance legal risks across jurisdictions with flexible, resilient decision making.
Mervyn Chen is a senior partner at Wintell & Co. He can be contacted on +86 136 0165 2399 or by e-mail at mervyn.chen@wintell.cn
Vicky Wang is a partner at Wintell & Co. She can be contacted on +86 186 2183 4731 or by e-mail at vicky.wang@wintell.cn
