Chinese Court to Curb Foreign Sanctions

According to a recent report from the South China Morning Post (SCMP), China's Supreme People's Court has created a new financial court in Beijing tasked explicitly with reviewing cases where Financial Institutions (FIs) and other businesses are alleged to have "damaged the legitimate interests" of Chinese investors by following the requirements of overseas sanctions.

• https://www.scmp.com/economy/china-economy/article/3125830/chinas-new-financial-court-given-jurisdiction-handle-lawsuits

The Beijing Financial Court is the second of its kind to be created in China, following the establishment of the Shanghai Financial Court in August 2018.

Although the Supreme People's Court has not yet published a whole statute outlining the new court's jurisdiction, its inaugural session is likely soon.

In its statement on the development, the Supreme People's Court said that the new court would have "centralized jurisdiction" over cases involving overseas-listed Chinese or foreign companies and foreign FIs.

• http://www.court.gov.cn/zixun-xiangqing-290961.html

The Chinese authorities have presented the move as a direct counter to the actions of the US, which has increasingly used economic and financial sanctions against China and Chinese businesses as leverage in a range of disagreements over trade, the status of Hong Kong, and geopolitical issues in the region.

Several major Chinese companies, such as the significant chip producer SMIC, has already been designated by the US government because of reported links to the Chinese government and military, and non-Chinese FIs have been required to cease and desist from doing business with designated Chinese nationals and corporations.

The creation of the court is one of a succession of recent actions supporting China's evolving 'push back' strategy against US measures.

Last year, China amended its securities law to target overseas FIs that were perceived to have caused damage to Chinese investors, and similar clauses will appear in forthcoming laws on financial futures and commercial banking.

In September 2020, the Chinese Ministry of Commerce also introduced an 'Unreliable Entity List', for "foreign firms and individuals who violate normal market transactions in China, interrupt deals with Chinese firms, or take discriminatory measures against Chinese firms."

Punishments for those added to the list could include economic and financial sanctions, and for individuals, travel restrictions. So far no company or company official has been added.

The creation of the court also comes at a time of increasing tension between China and the US and its allies.

Despite the change of US administration from former President Trump to President Biden, the US has maintained a demanding tone towards China, with the recent imposition of new sanctions against 24 Chinese officials alleged to have been involved in undermining Hong Kong's autonomy.

• https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20210317

The US has also very recently coordinated with the EU, UK and Canada on the implementation of sanctions against Chinese officials and a security and construction organization alleged to have been involved in human rights abuses against the Uyghur population in China's Xinjiang Uygur Autonomous Region.

China has responded to the EU sanctions with the imposition of travel bans on 10 EU officials and four institutions.

These developments suggest that sanctions will continue to be 'tools of choice' for western countries seeking to influence China, especially as the EU now seems more willing to join the US in their application and the UK is pivoting towards a more critical view of Chinese behaviour.

• https://www.theguardian.com/politics/2021/mar/13/hong-kong-uk-accuses-china-of-breaching-joint-declaration

Combined with this, of course, it also appears that China will be seeking to respond in kind with counter-sanctions of its own, generating an increasingly difficult landscape to negotiate for businesses with regional and global interests.

Source

• https://complyadvantage.com/blog/china-and-sanctions-uk-and-money-laundering-us-and-marijuana-compliance/?utm_source=Pardot&utm_medium=email&utm_campaign=Mar29_newsletter