Chinese State Council Releases New Regulations on Anti-Undue Extraterritorial Jurisdiction

On April 7, China’s State Council released National Order No. 835, “Regulations of the People’s Republic of China on Anti-Undue Extraterritorial Jurisdiction by Foreign Countries,” which entered into force on the same day. The directive does not impose new restrictions or penalties on covered entities today, but instead creates a statutory architecture that empowers Beijing to more forcefully respond to foreign regulatory actions deemed harmful to Chinese interests. The framework escalates previous ministry-level regulations to the State Council level, which carries greater legal weight and enforceability. For firms with Chinese operations or interests, Order No. 835 sharpens an existing compliance tension between corporate obligations under foreign export controls and trade measures and Chinese domestic law, while significantly expanding Beijing’s legal authority to act on it.

At a Glance

• Prohibitions on Compliance: Chinese individuals and entities are generally prohibited from complying with, or assisting in compliance with, designated foreign “unjustified extraterritorial measures,” absent special government approval.
• Enhanced Countermeasures: The Chinese government may impose wide-ranging countermeasures against offending foreign states and parties, including visa bans, asset freezes, and trade and investment prohibitions.
• Malicious Entity List: Foreign organizations and individuals involved in implementing designated foreign measures may be sanctioned and listed on the Malicious Entity List, with exposure extending to affiliated and associated entities.
• Litigation Exposure: Chinese companies and individuals harmed by designated foreign measures may bring civil litigation in Chinese courts against the entities or individuals that implemented or assisted in their implementation.

Key Provisions

Identification and Designation

Articles 3 and 4 establish the jurisdiction and scope of the regulation. Under Article 3, the Chinese government is empowered to respond to foreign extraterritorial measures that:

• Violate international law and the “basic norms” of international relations;
• Endanger China’s national sovereignty, security and development interests; and
• Harm the legitimate rights and interests of Chinese citizens and organizations.

 Article 4 establishes Beijing’s right to exercise extraterritorial jurisdiction over foreign acts that “have appropriate connections with China,” in the interest of safeguarding the above principles. If a foreign state claims jurisdiction over the same act, the two parties can resolve the dispute through treaty or diplomatic consultation.

Article 6 creates the formal identification process of foreign measures of concern. The legal affairs department of the State Council is responsible for identification, which assesses whether a specific foreign measure constitutes undue extraterritorial jurisdiction. The assessment shall consider several factors, including:

• Whether the measure violates international law and the “basic norms” of international relations;
• Whether the connection between the foreign measure and foreign state is appropriate;
• Whether it endangers China’s national sovereignty, security and development interests, or harms the legitimate rights and interests of Chinese citizens and organizations; and
• Other factors that “should be considered.”

Relevant organizations and individuals may submit suggestions to the department of legal affairs to inform the identification process. Upon finding that a measure constitutes an undue extraterritorial jurisdiction measure by a foreign authority, the legal affairs department may issue a public announcement. The triggering standards for both jurisdiction over and identification of a foreign measure are broad and largely undefined in Chinese law, providing the State Council with substantial discretion throughout the process.

Government Countermeasures

Articles 7‒9 articulate the full scope of exposure for foreign states, companies and individuals connected to measures designated as an undue extraterritorial jurisdiction, including the limited avenue for relief.

Article 7 authorizes the Chinese government to assess the conduct of “relevant countries,” likely those whose measures have been identified under Article 6 and take countermeasures and other restrictions against those countries based on the risk level posed by the identified measures. Countermeasures and restrictions will target areas including diplomacy, entry and exit, trade, investment, international cooperation and foreign aid. The regulation does not define “relevant countries” or specify which countermeasure categories correspond to which findings, leaving both determinations to the State Council’s discretion.

Article 8 establishes the Malicious Entity List. Departments within the State Council, such as the Ministry of Commerce or the General Administration of Customs, may add foreign organizations or individuals that promote or participate in the implementation of identified extraterritorial foreign measures to the list. Available countermeasures against listed entities include:

• Refusal to issue a visa, entry denial, visa cancellation or expulsion;
• Cancellation or restriction of work or residency qualifications in China;
• Freeze or seizure of property in China, including movable, immovable or other types of property;
• Prohibition or restriction on data or personal information transfer between listed entities and organizations or individuals in China;
• Restrictions on import, customs and export activities, including investments in China; and
• Fines and other measures.

Beyond the listed entity itself, these countermeasures can apply to organizations actually controlled by the listed entity, or that participated in the establishment or operation of the listed entity. In practice, this language is sufficiently vague to extend liability across the corporate structure, potentially exposing parent companies, subsidiaries or joint venture partners to retaliation.

Article 9 defines a limited appeals process. Affected entities may apply to the State Council department that made the listing decision in an appeal for suspension, modification or termination of the corresponding countermeasure. Applicants must provide evidence of their corrected behavior and remediation of harm caused to Chinese operations or individuals. The relevant department may then decide to suspend, change or cancel the countermeasure and publish the determination via public announcement.

Compliance Obligations and Penalties

Once identified under Article 6, no organization or individual may execute or assist in the execution of the designated foreign measure. Although undefined, this prohibition would likely extend to all entities operating in China, including China-based subsidiaries of foreign companies. The regulation provides a special circumstances exemption for “Chinese citizens or organizations” facing a genuine need to comply with a designated foreign measure. These entities may apply to the legal department of the State Council for limited approval to implement or assist in implementing a designated foreign measure. However, whether this exemption extends to China-based subsidiaries of foreign companies is not addressed. A narrow reading of this exemption would exclude foreign subsidiaries entirely, leaving foreign companies without a mechanism for relief.

The same approval process applies in Article 11 to organizations or individuals subject to countermeasures or restrictions on the Malicious Entity List. For example, an organization that wants to engage with a restricted individual in import or export activities must apply to the relevant department of the State Council for a limited exemption. Notably, Article 11 drops the qualifier “Chinese” from the “organization or individual” eligible to apply for an exemption, in contrast to Article 6, which limits special-circumstance exemption to “Chinese citizens or organizations.” This distinction may signal that the Article 11 exemption process is available to foreign subsidiaries operating in China.

Article 12 establishes the investigative authority for organizations or individuals suspected of implementing or assisting in the implementation of designated foreign measures. Relevant departments of the State Council are empowered to conduct on-site inspections, review and copy relevant materials of suspected entities, which must cooperate and may not refuse or obstruct such investigations.

Article 13 defines the prohibitive authority against entities that implement or assist in the implementation of designated foreign measures. Relevant departments may conduct interviews and order rectification of such entities, and the department of legal affairs may issue an injunction blocking the organization or individual from implementing or assisting in the implementation of the designated foreign measure.

Enforcement and Penalties

Article 14 creates a private right of action. Chinese citizens and organizations harmed by an entity that implements or assists in the implementation of a designated foreign measure may file a lawsuit in Chinese court. The Chinese plaintiff can seek the cessation of the harmful conduct or compensation for losses. This condition creates significant civil liability for entities operating in China.

Article 17 establishes penalties for entities that refuse to comply with or attempt to circumvent the countermeasures or injunctions issued under these regulations. Penalties include prohibitions or restrictions on:

• Government procurement, bidding and tendering;
• Importation and exportation of goods and technologies or international trade in services;
• International data and information transfers;
• Restrictions on entry and residency; and
• Fines and other measures.

Article 18 connects violations of these regulations to existing Chinese criminal law, establishing that conduct prohibited under Order No. 835 that rises to the level of a criminal offense will generally be prosecuted accordingly. Article 19 appears to preserve the operation of existing statutes, such as anti-corruption, anti-monopoly, export control and data security provisions, alongside this regulation. Where those laws govern overlapping subject matter, the existing statute appears to prevail over the new regulation.

Implications

Order No. 835 provides Beijing with significant authority to designate specific foreign regulatory measures as impermissible under Chinese law, prohibit Chinese entities from complying with such measures and impose consequences on those who do. No foreign measures have been publicly designated, nor entities listed, as of the date of promulgation. The activation of this new framework depends on State Council-level decisions that will be shaped by the trajectory of U.S.-China trade relations, including the current pause on certain export controls through November 2026.

The most pressing near-term question for companies with Chinese operations or business interests is whether any foreign regulatory obligation they currently comply with, such as U.S. export controls or investment restrictions, could be designated under Article 6. The intentionally vague criteria for designation leave the determination entirely to State Council discretion, meaning virtually any foreign export control or trade restriction affecting Chinese entities could plausibly meet the threshold. Given the unpredictable nature of a political decision reliant on U.S.-China bilateral relations, the more immediate concern for companies is ensuring they understand their exposure and have a plan if the stability of relations changes.

Next Steps

In the wake of Order No. 835, companies with Chinese operations or business interests should take stock of their exposure and consider proactive steps to manage sharpened compliance risks. Brownstein stands ready to help impacted companies navigate this evolving landscape, including:

• Mapping potential conflict-of-laws exposure for China-based entities subject to foreign export controls, sanctions or trade restrictions that could plausibly be designated under Article 6;
• Reviewing and updating sanctions, export control and China-related compliance policies in light of the new framework;
• Assessing corporate structure exposure, including the potential liability of parent companies, subsidiaries and joint venture partners under the Malicious Entity List provisions; and
• Developing contingency strategies for engaging the Article 6 special circumstances exemption process should a relevant designation occur.

For additional insights into the status of U.S.-China relations, or assistance in navigating this rapidly evolving regulatory environment, please contact a member of the Brownstein team.

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THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING NEW CHINESE REGULATIONS THAT MAY AFFECT TRADE. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS.