Today, I’m going to talk about the relatively new Chinese Anti-Foreign Sanctions Law. I made a video about this new law and some possible consequences back in April, it was called “why you can’t mess with China anymore”*
Let’s be honest, US sanctions are legal in the USA, but they are not legal in other countries - there are of course some countries which want to comply with US sanctions and punish China but the vast majority of countries, including many businesses inside of China are not willing but forced to comply.
A great example was, until quite recently the Chinese banks, when a Chinese corporation or individual was sanctioned, the Chinese banks were forced because they need access to the USD and the SWIFT system as well as other financial tools, to deny that person access to their funds. Imagine that, an individual working for a company in China who is sanctioned, can’t access their legally earned income which is based in their legally opened and lawfully operated bank account in China. It’s completely and totally ludicrous but if the Bank of China allowed access to the funds, then they themselves could be subject to secondary sanctions - I actually know someone personally that this happened to.
The US ensures compliance by threats, so bankers, shippers, container companies, many others involved in the chains that make economies tick are enforced into compliance with sanctions that are only legal in the USA. They were afraid that not enforcing them will have dire consequences on their own businesses so they operate in an illegal way and comply with a law that has no legal basis outside of the USA.
Well, not anymore. This week a Singaporean shipping company received a hefty fine in China, the fine was just short of 5 million RMB. What happened was, they had refused to fulfill a shipment from Shanghai to Panama and returned the goods because the Hong Kong shipper was included on a U.S. sanctions list. I hope you heard that, a Singaporean shipping company, nothing to do with the USA, refused a shipment that was sent from Shanghai, in China, to Panama in Central America, of products that were being shipped by a HK company that is sanctioned.
Had the goods been going to the USA, then this would not have been illegal, because the goods, or the company shipping them are sanctioned there and Chinese domestic law can’t change that.
However, the Shanghai Maritime Court ruled this as a breach of contract, China has not sanctioned this company, the US had nothing to do with the product, the shipping or the destination so, based on Article 12 of the new Anti-Foreign Sanctions Law, the court ordered compensation for the loss of over RMB 4.99 million plus interest. It went on to the Supreme People’s Court which subsequently listed it as a typical case, stating it was the first judicial judgment confirming the mandatory applicability of the law.
What we’re seeing here is world changing, it’s not a small matter, it’s actually huge China has stood up to the USA and is now telling every other country in the world you have a choice. If you decide that you are afraid of US sanctions and the consequences of disobedience to the “rules based order” then you don’t operate under international law
in other words, your fear of U.S. sanctions” will no longer serve as a reason to refuse performance. your choice now is do business with China legally or obey Washington and leave China - China just made the global economy into a zero sum game, if you want to obey Washington’s illegal sanctions you can, but you can’t operate with impunity inside China anymore
Some reports suggest that this is two sets of rule operating in co-existence, I prefer to describe it another way - it’s one set of rules, China’s telling the bully that their “rules based order” which are not recognised anywhere as a legal mechanism, won’t work anymore
Multinational corporations which operate inside of China and under US scrutiny have a real choice now. Comply with Chinese law, or don’t. If you don’t you’ll be fined and eventually it will be more expensive to operate in China when not complying with Chinese law.
The US might decide that it’s compliance with them or else... Well, the “or else” might be complete loss of Chinese business because China has decided not to comply and not to allow businesses in China to comply with unlawful sanctions - good on them!
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Apparently there’s been a recent development where China is making compliance with the RBA (Responsible Business Alliance) rules illegal, as retaliation against the new US sanctions on Chinese firms using “forced labour” (which is ironical given US is notorious for its prison labour).
If enforced this will really disrupt decades of US MMCs dictating terms to the Chinese supply chain.
The gloves are really coming off.
The world should be applauded that there is an alternative away from the hegemonic design of US long arm jurisdiction.