The Ministry of Commerce (MOFCOM) on May 2 issued an order prohibiting any recognition, enforcement or compliance with sanctions the U.S. imposed on five Chinese companies on the grounds of their alleged involvement in Iranian petroleum transactions.

The U.S. unilateral measures include placing the companies on the so-called Specially Designated Nationals List, freezing their assets and banning transactions with them.

MOFCOM's move is a pivotal action by China to use legal means to counter the unjustified extraterritorial jurisdiction of the United States and to safeguard national sovereignty as well as the legitimate rights and interests of Chinese enterprises. It demonstrates China's firm determination to defend a fair international economic and trade order, and to resist hegemonism.

This is the first time MOFCOM has issued such an order based on the Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures. Effective as of January 2021, these rules specifically apply to situations in which the extraterritorial application of foreign legislation or other measures unjustifiably prohibits or restricts citizens, corporations and other organizations of China from engaging in normal trade and related activities with their counterparts in third countries.

The U.S. has long taken actions that many countries consider to disregard the basic principles of international law and the fundamental norms of international relations. It has imposed unilateral sanctions on companies from other countries based on its domestic administrative orders, effectively placing its domestic laws above internationally accepted rules.

The U.S. sanctions on Iranian oil trade are widely seen as driven by its own geopolitical interests, and they constitute interference in the normal and legitimate trade cooperation between China and Iran. The U.S. disregards the legitimate rights of Chinese companies to engage in business activities under international law and has been accused of politicizing and weaponizing trade issues.

These U.S. sanctions on the Chinese enterprises not only seriously damage the legitimate business rights of Chinese companies and disrupt the normal order of global energy trade, but also violate the principles of sovereign equality and non-interference in the internal affairs of other countries. Such actions run counter to the basic principles of fair competition in international trade.

MOFCOM's prohibition order is not merely a diplomatic statement, but a legal and rational countermeasure. This move defines the red line for China in addressing foreign extraterritorial jurisdiction, negates the legal effect of unilateral U.S. sanctions, and frees Chinese enterprises from the shackles of forced compliance with foreign illegal sanctions. It provides a solid legal guarantee for their normal business operations.

According to the Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures, where a person complies with the foreign legislation and other measures within the scope of a prohibition order, and thus infringes upon the legitimate rights and interests of a citizen, a corporation or any other organization of China, the latter may institute legal proceedings in a court and claim for compensation. Also, if a citizen, a corporation or any other organization of China suffers significant losses resulting from non-compliance with foreign legislation and other measures, government departments in charge may provide the necessary support.

Faced with an increasingly complex international trade environment, the international community should jointly resist unilateral sanctions and undue extraterritorial jurisdiction, and promote the development of a more just, reasonable and stable global economic and trade order. BR

Copyedited by Elsbeth van Paridon

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