The Chinese Supreme Court has made it clear that China is now forcing corporations to choose between respecting US sanctions or respecting their existing contracts with Chinese businesses:
China’s top court recently highlighted the first judicial ruling establishing the mandatory nature of its Anti-Foreign Sanctions Law, which experts say could provide legal precedent and guide Chinese companies facing increasingly frequent overseas sanctions amid intensifying geopolitical tensions.
The case, heard by the Shanghai Maritime Court, centred on a dispute that involved US sanctions, a Singapore shipping company, a Hong Kong-based company and electronic goods shipped from Shanghai. In 2022, the Hong Kong-based company hired a Singaporean shipping firm to transport electronic goods from Shanghai to Panama, but the Singaporean firm later refused to deliver them and eventually returned the cargo to Shanghai, citing the Hong Kong company’s inclusion on a United States sanctions list. That caused losses for the Hong Kong company.
A court judgment unveiled last month showed the Shanghai court ruled against the Singaporean firm in February, ordering it to pay more than 4.99 million yuan (US$739,600) in damages plus interest and holding that it could not use a foreign country’s “discriminatory restrictions” as a defence under Article 12 of China’s Anti-Foreign Sanctions Law.
The case was included in a selection of illustrative maritime cases by the Supreme People’s Court that was released in June. In its commentary on the selection, the top court said the case was “the first judicial ruling to explicitly establish the mandatory application of the Anti-Foreign Sanctions Law”. It added that the case carried “strong exemplary significance” in demonstrating how China’s maritime courts implement the Anti-Foreign Sanctions Law – which took effect in 2021 – and safeguard the stability of supply and industrial chains.
Given the size of the Chinese market and the growing power of its economy, it’s pretty obvious which side most Asian corporations are going to take. What will be interesting is to see how many Japanese and European corporations also choose China.
Regardless, the failure of sanctions with regards to both Russia and Iran now demonstrate that it’s a weapon that harms the wielder more than it does the target.