China Invokes its Anti-Foreign Sanctions Law in Chip War
Recently, the Chinese government has issued a stern response to the United States’ guidance aimed at blocking the use of Huawei Ascend and other advanced Chinese computing chips.
On May 20, Chinese State Councilor and Foreign Minister Wang Yi, during a meeting in Beijing with Kim Kyo-hyun, President of the Asia Society, stated:
"The United States continues to suppress and contain China’s legitimate right to development. Its recent attempt to comprehensively ban Chinese chips is blatant unilateral bullying. China firmly opposes it."
On May 21, a spokesperson from China’s Ministry of Commerce further remarked:
"The Chinese side emphasizes that the U.S. measures may constitute discriminatory restrictions against Chinese companies. Any organization or individual that implements or assists in implementing such U.S. measures may be violating the Anti-Foreign Sanctions Law of the People’s Republic of China and other relevant laws, and must bear the corresponding legal responsibility."
The U.S. guidance explicitly states that using Huawei Ascend chips may violate U.S. export control laws. The Ministry of Commerce’s statement makes it clear that any action taken—out of concern for U.S. export control risks—that amounts to "implementation or assistance in implementing" the U.S. guidance, may be considered a violation of China’s Anti-Foreign Sanctions Law.
According to Article 12 of the Anti-Foreign Sanctions Law:
“No organization or individual may implement or assist in implementing discriminatory restrictive measures taken by foreign states against citizens or organizations of China.”
“If an organization or individual violates this provision and harms the legitimate rights and interests of Chinese citizens or organizations, those affected may file a lawsuit in Chinese courts, demanding the cessation of infringement and compensation for damages.”
According to Order No. 803 of the State Council issued in March, which outlines the implementation rules of the Anti-Foreign Sanctions Law:
Article 17: Relevant departments of the State Council have the authority to conduct interviews, issue rectification orders, and take appropriate actions against organizations or individuals that implement or assist in implementing discriminatory foreign measures.
Article 18: Victimized Chinese entities or citizens may file civil lawsuits to stop the infringement and seek compensation.
In other words, the Chinese government considers the U.S. guidance to be a “discriminatory restrictive measure” subject to China’s Anti-Foreign Sanctions Law. Any organization or individual that implements or assists in implementing the guidance may face two types of legal risks:
Administrative measures: including interviews, correction orders, and potential penalties by Chinese authorities;
Civil litigation: affected entities may file lawsuits under Article 12 to demand cessation of such actions and compensation for resulting losses.
However, the law and its implementation rules do not define clearly what constitutes “implementation or assistance in implementing” (执行或协助执行)a foreign measure. This makes Article 12 highly policy-driven and open to interpretation in practice.
For example, how should one determine whether a Chinese company suspending procurement of domestic high-performance chips did so for legitimate business reasons (e.g., project delays or strategy changes) or out of fear of violating U.S. export controls? If a clause is added to a supplier contract requiring compliance with U.S. guidance, would that be considered “assisting in implementation”? If companies conduct compliance due diligence or risk assessments because of the guidance, does that constitute “assistance”?
Since the law was enacted in 2021, actual enforcement of Article 12 has been extremely rare. The only publicly known case was cited in the 2024 Supreme People’s Court Work Report.
In that case, a Chinese company built a floating oil storage and water treatment module for a European firm. After project completion, the U.S. Treasury designated the Chinese company on the SDN list for violating Russia-related sanctions. The European client then refused to pay nearly ¥100 million, citing compliance with U.S. sanctions. The Chinese company filed a lawsuit domestically, invoked the Anti-Foreign Sanctions Law and China’s Blocking Rules, and ultimately succeeded in compelling the European firm to obtain a U.S. Treasury license and complete payment.
Despite the lack of precedent, after the Ministry of Commerce’s recent statement, the U.S.’s General Prohibition 10 (under the Export Administration Regulations) and China’s Article 12 of the Anti-Foreign Sanctions Law have entered a state of direct legal conflict.
This means: any global company—including foreign-invested or domestic companies operating in China—may be found in violation of Article 12 if they choose to comply with the U.S. guidance regarding Huawei Ascend or other Chinese high-performance computing chips.
Unlike the EU’s Blocking Statute, China’s Anti-Foreign Sanctions Law has no “waiver system”, leaving affected companies with no clear legal workaround for this regulatory clash.
Amid ongoing U.S.-China geopolitical tensions, both sides have been expanding and reinforcing their sanction and counter-sanction regimes. Given the two countries' significant influence in global politics and economics, these laws increasingly show extraterritorial reach.
As a result, more and more Chinese and American companies are caught in the middle, facing a dilemma where compliance with one country’s laws may mean violating the other’s. Due to the U.S. policy of “secondary sanctions,” companies from third countries that do business with China are also finding themselves affected—risking U.S. penalties and Chinese countermeasures.
That said, the legal tension also creates potential grounds for legal defense.
In U.S. legal practice, when a foreign individual or company faces a conflict between domestic and U.S. law, they may invoke the “Foreign Sovereign Compulsion” defense in court. The logic is: the violation of U.S. law occurred only because the company was compelled to comply with mandatory laws in its home country, under the threat of serious consequences.
U.S. courts may then conduct a review based on the principle of “International Comity”, and in some past cases, they have accepted such a defense and granted immunity from liability under U.S. law.
For example, in In re Vitamin C Antitrust Litigation, U.S. importers accused Chinese vitamin C producers of price fixing in violation of U.S. antitrust law. The Chinese companies argued they were merely complying with mandatory export policies set by China’s government. China’s Ministry of Commerce even submitted a rare letter to the U.S. court confirming this. While the case ultimately settled before reaching the Supreme Court, the U.S. Court of Appeals sided with the Chinese companies, granting deference to the official position of China’s government.
In Tiffany (NJ) LLC v. Qi Andrew, Tiffany sued several Chinese sellers for counterfeit sales and subpoenaed Chinese banks for financial records. The banks argued that compliance would violate China’s Commercial Bank Law, citing past penalties for unauthorized cross-border data sharing. The court ultimately acknowledged the legal conflict and accepted the banks’ defense.
These comity-based analyses are grounded in international law doctrines such as the Act of State and State Sovereignty Immunity, and U.S. courts often consider:
the strength of the foreign sovereign interest,
the severity of the legal conflict,
the importance of the U.S. interest,
the clarity and enforceability of the foreign law,
potential consequences for the party, and
the broader diplomatic implications.
This leads to a compelling question:
If a Chinese company is penalized by the U.S. for “implementing or assisting in implementing” China’s Anti-Foreign Sanctions Law, can it sue in U.S. court and invoke the Foreign Sovereign Compulsion defense?
Such a company might argue:
It was merely complying with China’s mandatory law, not willfully violating U.S. export controls;
China’s Ministry of Commerce explicitly warned that failure to comply would result in legal liability;
It was caught in a direct legal conflict and had no choice.
However, this defense would face serious hurdles. In recent years, U.S. courts have become more reluctant to accept such arguments, especially when China is involved. Courts are applying stricter standards and are less inclined to grant deference to foreign legal obligations.
More importantly, the U.S. government would almost certainly invoke national security to justify the guidance and argue that such concerns override any comity-based defense. Once national security is invoked, courts tend to side with the government, leaving little room for corporate defenses based on foreign legal compulsion.
Even if a Chinese company could file suit and have the case heard, it would face a highly difficult legal battle.