Understanding the Regulations on Countering Improper Extraterritorial Jurisdiction by Foreign States

On 15 May 2026, the Ministry of Justice of the People’s Republic of China issued Announcement No. 5. Pursuant to the Regulations of the PRC on Countering Improper Extraterritorial Jurisdiction by Foreign States (hereinafter the “Regulations”), the Announcement determined that certain cross-border investigative practices adopted by the European Union in its investigation of Nuctech Company Limited under the EU Foreign Subsidies Regulation (FSR) constitute improper extraterritorial jurisdiction measures, and expressly required that no organization or individual shall implement or assist in the implementation of such measures. This marks the first instance in which China has identified and prohibited the enforcement of foreign improper extraterritorial jurisdiction measures since the entry into force of the Regulations.

Nuctech Company Limited is a major supplier in China’s security inspection and testing equipment sector. Since 2024, the European Commission has launched an investigation into the company under the EU Foreign Subsidies Regulation (FSR). During on-site inspections, it collected documents and electronic data and requested access to the company’s email systems. However, Nuctech refused such requests on the grounds that the relevant data was stored in China and involved data security concerns. The case therefore extends beyond the scope of the FSR itself, shifting the central issue to whether foreign regulatory authorities may require companies to produce data located within the territory of China.

For multinational enterprises, this case highlights a practical issue: when overseas regulatory requirements conflict with data security obligations under PRC law, how should companies define compliance boundaries and manage legal risks? This article uses the Nuctech case as an entry point to provide a brief analysis of the main content of the Regulations and key considerations for corporate responses.

On 13 April 2026, the State Council of the People’s Republic of China promulgated the Regulations of the PRC on Countering Improper Extraterritorial Jurisdiction by Foreign States. This represents another important institutional measure in China’s efforts to improve its foreign-related legal system and address foreign “long-arm jurisdiction”. In recent years, China has gradually established a regulatory framework covering countermeasures, blocking measures, and legal remedies. On the one hand, it authorizes competent authorities to adopt countermeasures against specified foreign entities; on the other hand, it also provides enterprises with a clear legal basis and avenues for relief when responding to foreign investigations and sanction requirements.

The Nuctech case has emerged against this regulatory backdrop as the first landmark practical case following the implementation of the Regulations.

The Regulations do not seek to deny foreign states’ lawful exercise of regulatory authority within their own jurisdictions but rather target extraterritorial measures that exceed reasonable jurisdictional limits and improperly affect China’s sovereignty and the lawful rights and interests of Chinese enterprises.

Whether a measure constitutes improper extraterritorial jurisdiction is assessed by the relevant legal affairs department under the State Council, in conjunction with other competent authorities, taking into full consideration the following factors: (1) whether it violates international law and the basic norms governing international relations; (2) whether there is an appropriate nexus between the regulated conduct and the foreign jurisdiction concerned; (3) whether it endangers China’s national sovereignty, security, or development interests, or infringes upon the lawful rights and interests of Chinese citizens and organizations; and (4) any other factors that should be taken into account.

Once the Ministry of Justice, through an announcement, determines that a particular foreign measure constitutes improper extraterritorial jurisdiction, direct legal effects follow: no organization or individual may implement or assist in the implementation of such a measure.

Therefore, when receiving investigative requests from foreign regulatory authorities, enterprises should not only assess their obligations under foreign law, but also promptly consider whether the relevant measures have been publicly identified by the competent Chinese authorities.

Once the Ministry of Justice determines that a particular foreign measure constitutes improper extraterritorial jurisdiction, organizations and individuals that actively formulate, promote, or assist in the implementation of such measures may be placed on the Malicious Entity List by the relevant departments of the State Council in accordance with the law, and countermeasures may be imposed accordingly.

Countermeasures mainly include: imposing restrictions on visas, entry, stay, and residence for relevant individuals; adopting measures such as sealing up, seizure, or freezing of assets within China; restricting the provision of data and personal information, as well as trade cooperation, import and export activities, investment, and the entry of products and means of transport; and, in accordance with the law, imposing fines or taking other necessary measures.

It is noteworthy that the Regulations also endow countermeasures with a certain degree of piercing effect. In addition to entities included on the Malicious Entity List, other organizations that are ultimately controlled by, or involved in the establishment or operation of, such entities may also be subject to corresponding countermeasures.

The Prohibition Order established under the Regulations is the mechanism with the most direct impact on enterprises. Once the Ministry of Justice, through an announcement, determines that a particular foreign measure constitutes improper extraterritorial jurisdiction, no organization or individual may implement or assist in the implementation of such a measure. Where such measures have already been implemented or assisted in, the relevant authorities may, in accordance with the law, conduct regulatory interviews and order rectification within a prescribed time limit. Where there is a refusal to rectify, or where the circumstances are serious, further measures may be taken in accordance with the law.

The Regulations not only clearly establish a prohibition on enforcement but also put in place a more comprehensive framework of legal liability. Where a prohibition order is violated, measures may be imposed such as restrictions on participation in government procurement and public tendering, limitations on import and export activities and international trade in services, restrictions on cross-border data activities, and administrative fines, significantly increasing the cost of non-compliance.

Of course, the Regulations are not without exceptions. Where, due to mandatory requirements under foreign law, it is necessary in exceptional circumstances to implement the relevant foreign measures, organizations and individuals may apply to the relevant legal affairs department under the State Council; upon approval, such measures may be implemented within the approved scope.

For multinational enterprises, the promulgation of the Regulations means that in the future, when facing foreign regulatory investigations, extraterritorial enforcement actions, or cross-border data disclosure requests, companies should not determine whether to comply solely on the basis of foreign law. Instead, they must also concurrently assess compliance requirements under PRC law, including data security obligations and rules on counteracting improper extraterritorial jurisdiction. In particular, where the matters involve data located within China, affiliated entities, or critical business operations, it is advisable to conduct an early Chinese-law compliance assessment, and where necessary, promptly communicate with the competent authorities or submit applications in accordance with the law, so as to strike a compliance balance between different jurisdictions and minimize cross-border compliance risks.