Sanctions Top-5 for the week ending 8 January 2021

Here are five things that happened this week in the world of economic sanctions that I think you should know about.

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  1. China’s Ministry of Commerce (MOFCOM) issued “Order №1 of 2021 on Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures.” The order creates a framework for prohibiting or discouraging compliance with foreign sanctions, although it does not name specific sanctions that are in scope and does not appear to broadly prohibit compliance with US or other sanctions. (More on this below.)

Comments

It started as a hot potato. Now it’s a mashed potato. Executive Order 13959 officially took effect yesterday with respect to 31 of the 35 CCMCs on OFAC’s new Non-SDN CCMC List. How many issuers are really affected? It’s anyone’s guess. FAQ 857 said OFAC will list subsidiaries of CCMCs separately. Then the New York de-listing debacle happened. So FAQ 864 tells us the rules also apply to issuers whose names “closely match” a name on the list. (Not vague at all.) GL-1 gives everyone until 28 January to figure it out. I’ll have mine with butter and chives.

The MOFCOM order against “unjustified” and “extra-territorial” foreign sanctions is a big deal. Or is it . . ? On the one hand, China is building a bulwark against foreign sanctions that impinge on its national interests and sovereignty. (Inevitable, if you ask me.) And Saturday’s order complements the Provisions for the Unreliable Entity List issued in September 2020.

On the other hand, the order closely resembles the EU blocking statute and may not even be intended to address US sanctions targeting Chinese companies. (Wang Zichen at Pekingnology has more on that point here — highly worth a read.) At the end of the day, the order could be limited to “secondary sanctions” against Iran and other countries where Chinese firms suffer collateral damage. We won’t know for sure until MOFCOM issues “prohibition orders” detailing which foreign sanctions are actually in scope. Still a big deal, in my book.

Did I miss something? Send me a message or comment on LinkedIn.

(The views expressed are my own and do not constitute legal advice. Photo from Vladislav Reshetnyak.)

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Nicholas Turner

US attorney in Hong Kong specializing in economic sanctions, financial crimes. Sign up for emails: http://eepurl.com/cVhTXf LinkedIn at: http://goo.gl/KX1jER