Caught in the crossfire: How the EU’s Russia restrictive measures reached China and how Beijing struck back against EU companies
The war in Ukraine has caused the largest set of EU restrictive measures ever. Despite the EU traditional opposition to extraterritorial measures, the EU Council adopts increasingly measures against third-country companies in order to avoid the circumvention of its own sanctions. But, important jurisdictions like China retaliate against EU companies trading in China, which causes another layer of complexity for EU companies often alien to the armed conflict in Ukraine.
Will such retaliation lead to better focused EU sanctions, or will it contribute to aggravate the current challenging economic environment for EU companies operating internationally?
The EU's expanding restrictive measures reach beyond Russia
On 23 July 2026, the EU adopted its 21st package of restrictive measures against Russia, sweeping in banks, crypto-asset service providers, military-equipment manufacturers and a range of other categories.
While the EU had already begun targeting third-country entities in previous sanctions packages, the 21st package marks a further escalation by the new designation of numerous companies in China, India and Turkey alleged to be supplying Russia with dual-use goods and critical technology.
The rationale for these measures is to tighten export restrictions on entities in third countries that “indirectly contribute” to Russia’s military enhancement, notably in microelectronics, CNC machine tools and semiconductor-processing equipment, and enable “circumvention of Union restrictive measures.” Brussels seeks to choke off the third-country supply chains that keep Russia’s war machine equipped.
The designation of these foreign companies has the following consequences:
the imposition of asset-freezing measures under Regulation (EU) No 269/2014; and
the application of trade and export restrictions, including restrictions on dual-use items and battlefield goods, under Regulation (EU) No 833/2014.
This development continues a trend already visible with the 20th restrictive measures package (23 April 2026), which significantly expanded the EU restrictive measures architecture by extending asset-freeze listings to entities established outside the EU (including in China, the United Arab Emirates, India, Kazakhstan, Uzbekistan and Mauritius), introducing for the first time the anti-circumvention instrument through restrictions on exports of high-risk goods to the Kyrgyz Republic, and further intensifying measures targeting Russia's shadow fleet.
These measures further intensify the debate on the extraterritorial effects of EU restrictive measures. The EU has historically rejected the US extraterritorial sanctions model — most notably through the 1996 Blocking Statute, designed to shield EU operators from US extraterritorial sanctions. While the new listings remain formally limited to designations (EU persons may not deal with listed entities), they de facto impose direct consequences on third-country operators with no direct link to the underlying conflict. Moreover, the overcompliance of a number of companies faced with a multiple set of sanctions to comply with, make that often such third-country entities are directly affected in their home jurisdiction by EU measures even if they have no commercial or economic relationship with the EU.
The EU has also been building a comprehensive defensive arsenal to blunt foreign retaliation and abusive litigation: the “no-claims” clause and damages-recovery mechanisms in Regulation 833/2014 (Articles 11a/11b and Annex LV) allow Member State courts to counter enforcement of abusive third-country judgments — a mirror-image of the extraterritoriality problem.
The 21st package strengthens this toolkit considerably with the following measures:
Firstly, reinforced anti-suit injunctions (revised Article 11ca): Member State courts may now order a party not only to discontinue abusive Russian proceedings but also to refrain from seeking enforcement, recognition or reliance upon any resulting judgment “in any jurisdiction”;
Secondly, financial penalties proportionate to the potential loss may be imposed on those who violate such injunctions, payable directly to the EU entity;
Thirdly, an expanded non-recognition rule (revised Article 11c): no Russian court judgment or administrative decision — whether under Articles 248.1 or 248.2 of the Arbitration Procedure Code or any other Russian law — may be recognised or enforced in a Member State where it relates to contracts affected by EU restrictive measures;
Fourthly, the damages-recovery mechanism (revised Article 11a) is extended to cover claims brought in third-country courts — not only Russian courts — thereby addressing the risk that sanctioned parties relocate litigation to friendlier jurisdictions;
Finally, the package extends divestment derogations until 31 December 2027, acknowledging that Russian legislation and forced asset transfers have made orderly withdrawal from the Russian market increasingly difficult for EU companies.
China's immediate response
Fourteen mainland Chinese and Hong Kong enterprises were added to the EU’s Russia restrictive measures lists under the 21st package of sanctions. Most are logistic intermediaries and trading companies that are deemed helping Russian importers to obtain Western technology through circuitous supply chains.
Within 24 hours of the EU’s announcement, on Friday 24 July 2026, China’s Ministry of Commerce (MOFCOM) responded to the designation of 14 Chinese companies by adding 14 EU entities to its Export Control List, invoking the Export Control Law and Dual-Use Items Regulations. Chinese exporters may not supply these entities with dual-use items, and — mirroring the EU’s own logic — foreign companies are barred from supplying them with China-origin dual-use goods. Ongoing shipments must cease, with licences available only where exports are “truly necessary.”
The listed entities include several of Europe's leading defence and advanced technology companies : Germany’s Rheinmetall, Czech truckmaker Tatra Trucks, Dutch naval engineer IHC Merwede, Italy’s Lafert Group and Garnet, France’s III-V Lab, InPACT and Cavok UAS, Poland’s Vigo Photonics and Wrocław University of Technology, Belgium’s Opticoelectron Group, and Latvia’s Ekspla.
Chinese state media (China Daily) framed MOFCOM’s action as “measured and lawful reciprocity” and “a surgical warning,” recalling that when Brussels sanctioned 27 Chinese companies in April 2026, Beijing retaliated within 24 hours by blacklisting seven EU defence contractors.
China's counter-sanctions framework
Before 2020, China had no structured retaliation mechanism beyond diplomatic statements and ad hoc trade disruptions. That gap has been filled by a suite of legal instruments: the Unreliable Entity List (China’s Ministry of Commerce (“MOFCOM”), 2020); the Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation (the “Blocking Rules,” MOFCOM, January 2021); and the Anti-Foreign Sanctions Law (AFSL, Standing Committee of the National People's Congress, June 2021).
The AFSL itself is broad in scope. It applies where foreign states adopt “discriminatory restrictive measures” against Chinese citizens or organisations (Article 2). Countermeasures include visa denial or deportation, sealing, seizing or freezing property in China, and prohibiting transactions with the target (Article 6). Critically, Article 11 grants Chinese persons harmed by foreign sanctions a right to sue in Chinese courts for damages.
The 2026 escalation has added a further layer: State Council Order No. 834 (Provisions on Industrial and Supply Chain Security, effective 7 April 2026) and State Council Order No. 835 (Provisions on Countering Foreign Unlawful Extraterritorial Jurisdiction, effective 13 April 2026) create a “Malicious Entity List,” a “Prohibition Execution Order” mechanism, and a civil cause of action for Chinese parties harmed by foreign extraterritorial measures.
Enforcement is no longer theoretical:
On 2 May 2026, MOFCOM issued its first-ever blocking order under the 2021 Blocking Rules, barring parties in China from implementing US OFAC SDN designations against five Chinese “teapot” oil refineries;
On 15 May 2026, the Ministry of Justice determined that the EU Commission’s Foreign Subsidies Regulation probe into Nuctech was an “improper exercise of extraterritorial jurisdiction,” directing Chinese parties not to assist.;
Chinese courts have accepted AFSL-based civil suits — the Haiyue cases (against US banks over roughly US$40 million frozen pursuant to OFAC directives) and Wingtech’s approximately US$1.2 billion claim linked to the Nexperia/Dutch dispute.
MOFCOM has further expanded export controls against US and Japanese entities in June 2026 and issued Measures for Investigations into the Security of Industrial and Supply Chains, aimed partly at foreign “de-risking” policies.
Practical implications for international businesses
The practical effect is a two-way compliance conflict. An action required by US or EU restrictive measures — stopping payments, freezing funds, exiting a supplier, producing China-located records to a foreign regulator — may itself be treated under Chinese law as a “discriminatory measure” exposing the company and its executives to fines, asset freezes, transaction bans, visa cancellations and civil liability in China.
This is not yet a full-scale sanctions war, but it is a clear move towards greater reciprocity. As the EU, China and the US continue to respond to one another's measures, businesses can expect more listings, more retaliatory measures and more litigation. For companies active in multiple jurisdictions, restrictive measures compliance can no longer be approached from a single legal perspective.
For more information, please contact:
Bruno Lebrun – Partner – b.lebrun@janson.be
Wafa Lachguer – Associate – w.lachguer@janson.be