Earlier this year the State Council released the Provisions on Implementation of the PRC Anti-foreign Sanctions Law (AFSL Provisions, effective since 23 March 2025) and the Provisions on the Settlement of Foreign-related IP Disputes (IP Disputes Provisions, effective since 1 May 2025). While at first sight seemingly not connected, there is a material link between the AFSL Provisions and the IP Disputes Provisions that shows China’s preparedness to use administrative tools to deter foreign judicial acts that China deems harmful against its interest.
The existence of the AFSL, AFSL Provisions and the IP Dispute Provisions obliges any parties engaged in foreign (= outside China) or domestic legal action involving Chinese parties to carefully assess the risks of any dispute resolution strategies. Not only China-based enterprises but also foreign enterprises are affected by these regulations and must hence balance these Chinese regulatory and compliance requirements with other responsibilities resulting from conflicting sanctions regimes of other jurisdictions such as Europe and the US and general international compliance requirements.
The AFSL Provisions allow the Chinese government to take countermeasures against “promoting and implementing litigation by any foreign country, organisation or individual”, which the Chinese government deems will “endanger the sovereignty, security, and development interests of China”. It is thereby irrelevant where such litigation occurs inside or outside China and the “foreign” element is rather established by a foreign (invested) party promoting or implementing such litigation.
The potential countermeasures faced by the affected litigation subjects (including natural and legal persons) range from restrictions to enter/leave China, seizing of any kind of property in China; prohibition/limitation on transactions and cooperation with third parties; compulsory property enforcement and other measures.
Whether the AFSL Provisions will be applied also to private commercial disputes or are more directed against cases of important strategical/political matters remains to be seen. However, given the far-reaching wording and the lack of excluding private party legal action against Chinese parties, one would be amiss to think this could not become a tool at the convenience of Chinese regulatory bodies to invoke countermeasures even in cases of private commercial disputes against Chinese parties if China deems such legal action could endanger the sovereignty, security, and development interests of China.
The IP Disputes Provisions are expressly linked to the ASFL and AFSL Provisions. The IP Disputes Provisions emphasise that “containment or suppression” against China and “discriminatory restrictive measures” against Chinese citizens and organisations taken “under the guise of IP disputes” fall within the scope of AFSL.
While the AFSL uses the terminology of “containment, suppression and discriminatory restrictive measures”, it fails to define these terms. To date there is also no other public legislation known that would specify these terms. This ambiguity makes it very daunting to predict situations in which countermeasures could be taken against what China believes to be a foreign containment, suppression or discriminatory restrictive measures under the guise of international IP disputes in which Chinese enterprises are a party.
While the IP Disputes Provisions only became effective on 1 May 2025, already on 15 January 2025 the PRC Supreme People’s Court issued a ruling in patent dispute filed by Huawei against Netgear, prohibiting Netgear and its affiliates from seeking anti-suit injunctions in the US and other foreign countries that would restrict Huawei from initiating or continuing patent infringement proceedings in China.
Given that Chinese enterprises having become increasingly active in the international arena and are leaders in many high-tech sectors, it appears plausible to believe that in the future one will rather see more than less international IP disputes between foreign and Chines parties.
Therefore, with these new IP Disputes Provisions, any such international IP disputes between foreign and Chinese parties should be subject to a risk assessment if they could create cause for potential countermeasures being invoked by China against the foreign litigants. In addition, foreign parties starting litigation against Chinese parties for IP disputes may also risk other legal consequences such as refusal to recognise and enforce foreign judgments and arbitral awards in China if they would be considered by China to fall under these new provisions.
The AFSL obliges China-based organizations and individuals to implement China’s countermeasures to (a) safeguard China’s interests against discriminatory restrictive measures imposed on organizations and individuals, and (b) against interference with China’s internal affairs by foreign countries, or individuals and organisations that have directly or indirectly participated in the formulation or implementation of discriminatory restrictive measures.
The AFSL entitles Chinese individuals or organisations to initiate civil legal action to demand cessation of infringement and compensation for losses against any organisation or individual that “implements or assists in implementing discriminatory restrictive measures” taken by any foreign country against them.
Further, the AFSL Provisions allow administrative measures to be taken against such organisations or individuals, including conducting interviews, orders to make corrections and other corresponding measures.
In both such cases (civil & administrative cases), the related liabilities and administrative penalties apply to China-based and foreign organizations and individuals.
Legal consequences suffered in case of a failure to execute China’s countermeasures can entail the following: being ordered to make a correction, prohibition/limitation to partake in government procurement and in import/export of goods & services in general, prohibition/limitation to transfer/receive data and personal information across borders and prohibition/limitation to enter/exit China.
Cooperations involving organizations or individuals against whom countermeasures have been taken are generally prohibited or limited unless an exemption is granted as per the AFSL Provisions. Such an exemption application must be submitted to the State Council department and documentary requirements, review timelines, and substantive evaluation criteria of the exemption mechanism remain subject to further clarification.
Susanne Rademacher
