China eyes new laws to counter US sanctions

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Legislation will seek to neutralize US sanctions on firms like Huawei and could raise big new risks for foreign investors in China

https://asiatimes.com-by Frank Chen

A general view of the opening ceremony of the Chinese People’s Political Consultative Conference (CPPCC) at the Great Hall of the People in Beijing on March 4, 2021. Photo: Leo Ramirez/AFP

Beijing is poised to hit back at America’s long-arm jurisdiction in a move inspired by legal and jurisprudential tactics out of Washington’s playbook against Chinese entities.

Li Zhanshu, speaker of the Chinese Parliament and a standing member of the Communist Party’s governing body the Politburo, vowed in his annual report to the National People’s Congress (NPC) to tailor new legislation and elevate existing bylaws to arm Chinese courts with more powers to try cases involving foreign parties and companies.

Li noted the top lawmaking body would expedite foreign affairs-related legislation this year to counter sanctions and the perceived overreach of foreign governments, legislatures and courts. He said the NPC would form a systemic legal regime to nullify “unfair and draconian” foreign orders with countervailing Chinese laws.

The proposed laws will likely enable Chinese firms and individuals to haul more foreign entities who abide by US sanctions into Chinese courts, similar some say to the way Huawei and its Chief Financial Officer Meng Wanzhou have been sued and tried in Canada.

A Chinese Commerce Ministry bylaw introduced in January is seen by some as a harbinger of how Beijing intends to weaponize legal instruments to counter America’s sanctions.

The bylaw was aimed at heading off foreign courts taking extraterritorial jurisdiction over Chinese companies and citizens, with penalties including fines, curtailed market access as well as compensation for any losses incurred by a Chinese plaintiff.

More than 300 firms hit

The NPC will likely elevate the Commerce Ministry bylaw to the status of a formal piece of legislation. Its deputies have already brought up motions at the ongoing plenary meeting to codify statutes and regulations on various levels and pass new laws to deter the accusers of Huawei and other big Chinese companies with overseas operations.

The Chinese telecoms behemoth, seen as the epitome of China’s growing tech clout, continues to be a lightning rod for Western sanctions. But it is not the only victim as the US takes what many in Beijing see as a scattershot and arbitrary approach to curbing Chinese companies, particularly in the tech industry.

Commerce Minister Wang Wentao said during a panel discussion with NPC members that more than 300 Chinese firms had been hit by various bans and restrictions since 2018, many of them imposed by the outgoing Trump administration in the US.

So far the NPC has not fleshed out its related legislative agendas, but its standing committee, which continues to convene lawmaking meetings when the parliamentary plenum is in recess, has the power to announce and pass draft laws.

Professor Wang Jiangyu, director of the City University of Hong Kong’s Centre for Chinese and Comparative Law, told reporters the NPC may have been told by top leaders to hasten discussions and draft new laws before the Biden administration could pull allies together to close ranks against more Chinese firms and put their operations and supply chains at risk.

Reuters reported this week that Chinese President Xi Jinping said in a speech he gave in November that lawmakers should explore legal avenues to fight sanctions and safeguard Chinese interests.

Wang said a Commerce Ministry bylaw would still lack bite or power since prosecutors could only build a case and judges could only adjudicate on one in accordance with laws passed by the NPC as well as statutes and ordinances signed off by the premier and promulgated by the State Council.

“Beijing’s decree is to elevate bylaws to the national level and pass new laws to fill the void while until now China does not have a comprehensive legal structure to pursue foreign firms if their compliance with foreign laws impinges on the interests of Chinese entities, when, usually, the latter find they have little recourse …

“The goal is that once the US slaps new sanctions on Chinese firms and mandates third-party entities to obey, China’s legal procedures can be triggered for immediate follow-up and impose repercussions on those convicted,” said Wang.

The state mouthpiece China News Weekly also speculated that other than fines, judges may also be given greater sentencing power and the power to commit foreign offenders to custodial terms under the new laws.

Zhu Feng, dean of Nanjing University’s School of International Relations, was also quoted by state media as saying that Beijing was laying the legal groundwork to counter US sanctions and other punitive legal actions.

“The legal battleground of the Sino-US strategic tug-of-war is there and Beijing and the NPC lawmakers feel it behooves them to pass, amend and elevate laws as key planks of a new tactic to protect Chinese firms and citizens in future trade and tech disputes,” said Zhu.

A degree of uncertainty

Huawei did not respond to Asia Times’ emailed inquiries about how it may leverage any future Chinese laws to bolster its case in foreign jurisdictions where it now faces legal battles. Nor has the company indicated any intention to sue third-party suppliers who fall in line with Washington’s sanctions, including its chip ban on the company.

Nonetheless, any new legislation aimed at countering sanctions will add a new degree of uncertainty for foreign investors now operating in China, particularly suppliers and partners of high-profile Chinese firms. The European Chamber of Commerce voiced concern earlier this year when the Chinese Commerce Ministry gazetted its bylaw.

Meanwhile, the US Department of Commerce may update its advisories for US businesses to include the possibility of Chinese plaintiffs and prosecutors using archaic national security clauses in new laws, as well as the risks of “concocted cases” being filed against Americans in China’s opaque and politicized legal system, local news reports said.

 

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