China Issues New Regulations on Countering Extraterritorial Jurisdiction Measures by Foreign States
- Alan Grose, XL Law Consulting
- Apr 27
- 5 min read
On April 13, 2026, the State Council of the PRC published new Regulations to counter foreign sanctions measures it deems to be improper assertions of extraterritorial jurisdiction.
The new Regulations could target organizations and individuals who, by virtue of their compliance with foreign sanctions measures, particularly measures that scrutinize the control of Chinese entities, may be accused of implementing such measures.
IHEs with research collaborations or academic programs in China should weigh potential exposure and take steps to mitigate risks.
On April 13, 2026, the State Council of the People’s Republic of China (PRC), China’s highest centralized administrative body, issued a new set of PRC Regulations on Countering Improper Extraterritorial Jurisdiction by Foreign States, which will provide for a new level of centralized direction and cross-agency coordination in China’s ongoing effort to counter foreign sanctions measures, including those that have increasingly scrutinized the control of Chinese entities. The new Regulations do this by introducing a process to identify measures by foreign states the Chinese government deems to be improper assertions of extraterritorial jurisdiction and providing for administrative countermeasures and a private right of action that could target organizations and individuals who, by virtue of their compliance with such foreign sanctions measures, may be thought to implement or give effect to the extraterritorial measures of foreign governments.
For IHEs with research agreements or academic programs involving Chinese entities or with programs in China, compliance increasingly involves conflict-of-law exposure. Such IHEs should begin to evaluate and mitigate potential risks associated with these new Regulations.
Overview of the New Regulations
The new Regulations provide for the establishment of a “working mechanism” for planning and coordinating the response to the extraterritorial jurisdiction measure of foreign states that Chinese officials determine to be improper. This working mechanism establishes, first, a process for identifying measures deemed to be improper. It then creates a list for foreign organizations or individuals that are designated as malicious due to their promotion or participation in the implementation of such measures and sets out a list of countermeasures that may be invoked against such entities. While the working mechanism provides for certain administrative flexibilities to allow foreign entities to mitigate the impact of their actions or Chinese entities to request permission to continue to interact with designated entities, it also allows for a private right of action for Chinese organizations to attempt to recover losses suffered when a foreign organization acts in compliance with measures the Chinese government has designated as improper.
The following is a brief outline of the major components of the working mechanism.
Identification of Improper Extraterritorial Jurisdiction Measures. The PRC Ministry of Justice, together with other State Council departments, will identify measures taken by foreign states they consider improper exercises of extraterritorial jurisdiction. The Regulations provide for consideration of four broad factors: (1) whether international law and basic norms of international relations are violated; (2) whether the conduct subject to the foreign state's extraterritorial jurisdiction has an appropriate connection with that state; (3) whether the foreign state’s measures (i) endanger China’s national sovereignty, security, and development interests or (ii) harm the lawful rights of China’s citizens or organizations; and (4) other factors.
Malicious Entity List. Against the backdrop of measures designated as improper, the Regulations then call for State Council departments, in accordance with the working mechanism’s decision procedures, to enter organizations and individuals that promote or participate in the implementation of designated measures into a Malicious Entities List. Inclusion on such a list would potentially subject those organizations or individuals to investigation and the countermeasures described below.
Investigative Powers and Countermeasures. First, the Regulations provide relevant State Council departments with significant powers for investigating organizations or individuals suspected of implementing designated extraterritorial measures of foreign states, including the ability to inspect locations or facilities in China and to read or reproduce records for organizations or individuals. The relevant State Council departments may also decide to employ one or more of the following countermeasures against such organizations or individuals.
Denial or cancellation of visas, refusal of entry, or required departure in a set period, deportation, or expulsion;
Cancellation or restriction on the qualifications of relevant persons to work, stay, or reside in China;
Sealing, seizing, or freezing movable property, immovable property, or other types of assets within China;
Prohibition or restriction of organizations and individuals within China from providing data or personal information to such foreign organizations or individual, or prohibition or restriction of other activities, such as transactions and cooperation, with them;
Prohibition or restriction on import/export activities related to China;
Prohibition or restriction on investment within China;
Prohibition or restriction on entry of their products or transportation into China;
Fines;
Other necessary measures
These departments may also take similar actions against Chinese entities or individuals that refuse or fail to implement such countermeasures directed under the Regulations.
Administrative Flexibilities. Foreign organizations or individuals that have been subject to such countermeasures or restrictions may apply for suspension, modification, or cancellation of those countermeasures, particularly where they can show that they have corrected the conduct or taken other measures to eliminate the consequences of that conduct. Chinese organizations or individuals with special situations that need to conduct activities with foreign organizations or individuals where those activities are prohibited or restricted by countermeasures may also apply to the relevant department for approval to do so.
Private Right of Action for Chinese Individuals or Entities. Importantly, the Regulations also provide Chinese organizations or individuals with a private right of action that they can exercise when they believe a foreign organization or individual has infringed upon their rights through compliance with or other actions taken in light of the implementation of designated extraterritorial measures. Such PRC organizations may initiate court actions to stop the infringement or seek compensation for losses. The Regulations also provide that government departments at the provincial level or higher may provide guidance or other assistance to Chinese citizens or organizations in responding to improper extraterritorial jurisdiction measures by foreign states.
Implications for IHEs
While these new Regulations will be of most immediate concern to large financial institutions and multinational corporations with supply chains extending through China, IHEs with research agreements or academic programs involving China should weigh and take steps to mitigate their potential exposure now. In particular, they should:
Review and carefully structure term and termination provisions of agreements to reduce the risk that an exit may later be characterized as an actionable implementation of an improper assertion of extraterritorial jurisdiction.
Be careful to avoid the appearance of hasty reactions to regulatory developments or political scrutiny. If new U.S. legislation or regulations restricting contracts with China provide such a process, consider applying for an available waiver, license, or exemption.
Watch for designations by the Chinese Ministry of Justice of U.S. laws or regulations as improper extraterritorial jurisdiction and assess whether the IHE might be seen as giving effect to such a measure if it took steps to alter or terminate an ongoing research collaboration or academic program.
