From counter-sanctions to “anti-long-arm jurisdiction”: Beijing turns laws into geopolitical weapons, and multinationals are stuck between two sets of orders

The legal risks faced by multinationals in China are changing fundamentally: the most common question in the past is how to comply with local regulations in China, and now may face conflicting legal orders from Beijing and Washington, Brussels, etc. In recent years, China has continuously expanded its anti-foreign sanctions, blocked the application of foreign legal and foreign-related judicial tools, making “which side of the law” itself a political risk that companies must bear.

The key to this change is not a single law, but Beijing is building a set of institutions that can freeze assets, restrict transactions, prohibit the enforcement of foreign judgments and pursue the responsibility of the relevant entity. China has been criticizing the United States for years of “long-arm jurisdiction” and is now building its own out-of-domain legal capacity.

Law is no longer just a market rule, but a counter-tools box.

China’s anti-foreign sanctions laws, blocking measures, and expanding foreign-related judicial rules provide a legal basis for the government to counter foreign sanctions and restrictions.Once enterprises comply with U.S. or European sanctions requirements, in some cases they may affect China’s counter sanctions rules; in turn, if they continue to trade with Western sanctioned entities, they may face penalties in another jurisdiction.

This creates a legal “double-choice trap”:

• The United States requires companies to stop trading with specific Chinese entities;
• China may prohibit companies from enforcing foreign restrictions that are found to be inappropriate;
• Banks and insurance companies must decide whether to handle the funds involved;
• Different subsidiaries within multinational groups may be ordered by different jurisdictions;
• The ultimate cost of conflict is often the company, employees and investors.

When both powers demand that companies prove loyalty, so-called compliance is no longer just a lawyer’s check of contracts, it’s about choosing which punishment is more tolerable between two political systems.

The courts are becoming the second battlefield of geo-competition.

The expansion of the rule of law involving foreign parties means that the dispute is no longer limited to the list of administrative sanctions.Whether the courts can recognize foreign judgments, execute foreign arbitration, freeze domestic assets, and prevent parties from pursuing lawsuits abroad directly affects international business relations.

In recent years, China has promoted the construction of international commercial courts, maritime justice and foreign-related judicial systems, and emphasized the improvement of foreign-related judicial capabilities.The public objectives include safeguarding national sovereignty, security and development interests, while providing legal services for international economic and trade activities.

This double objective itself constitutes tension: “When national security is placed on commercial predictability, it is difficult for to judge whether a contract that is valid today will become a political issue tomorrow because of sanctions, export control or diplomatic conflict.”

Hong Kong’s common law interface is also involved in new legal competition.

Hong Kong has long assumed the role of a legal interface between China and global capital.International banking, shipping, insurance and arbitration agencies have chosen Hong Kong, depending heavily on its common law traditions, judgment predictability and connections with the international financial system.

But as China’s national security, sanctions countermeasures and foreign-related legal instruments expand, Hong Kong are also likely to face conflict orders.

The real question is not whether China has the right to make counter-laws, but whether the laws have clear borders, independent remedies and predictable judicial interpretations. If administrative and national security goals can overpower business rules at any time, the so-called legal certainty of multinationals will turn into policy certainty.

Beijing is replicating its long-standing critical logic.

China has long accused the United States of using U.S. dollars, financial sanctions and domestic law to enforce overseas jurisdiction.

But Beijing’s response is not to restrict the legalization of legal weapons, but to develop its own legal weapons.Anti-sanction lists, lists of unreliable entities, export controls, data security, state secrets and foreign-related justice jointly form a new institutional network.

This means that future multinationals will need to answer at the same time: can data go abroad, can products be exported, whether customers are sanctioned by a country, whether the execution of foreign court orders violates Chinese law, and whether the company’s employees can be personally liable.

The rule of law and “repression against the law” are not the same concept

A true rule of law emphasizes that power itself is bound by stable rules; “rule of law” emphasizes more the law as a tool of state action; both may use the same courts, laws and procedures, but have different logic of power.

If the law is first defined as a weapon in international competition, then and individuals are easily transformed from entitlements to keyboards in strategic games.

For Beijing, it is not difficult to establish legal capacity to respond to foreign sanctions.The more difficult question is: Can the courts say no to the government when the country decides to use these tools?Can get genuinely independent judicial remedies?Can foreign parties believe that the verdict is not an extension of diplomatic relations?

A country with more and more legal weapons does not automatically mean having a stronger rule of law; sometimes it just means more political conflict with a more formal package.