Author
Ms Xue Wang
Organisation/Institution
City University of Hong Kong, School of Law
Country
HONG KONG (SAR OF CHINA)
Panel
International Business Law
Title
Foreign Sanctions and Performance of Contracts in China: Drawing the Contours of Party Autonomy and Public Policy
Abstract
The global proliferation of unilateral economic sanctions with extraterritorial application presents a profound challenge to the performance of commercial contracts. Initially, under Chinese contract law, if contract performance was hindered by sanctions, the parties have sought relief in the private law concept of force majeure, arguing that sanctions constitute unforeseeable, unavoidable and insurmountable obstacles to contractual performance. While a substantial body of scholarship has examined this issue through the prism of comparative contract law, the debate increasingly needs to consider the transformative impact of a new generation of national “blocking statutes” that actively seek to negate the domestic legal effects of foreign sanctions. This paper thus contributes to the emerging scholarly discourse by providing an empirically-grounded analysis of the emerging paradigm shift in assessing the effects of sanctions on contract performance, driven by the enactment of China’s Anti-Foreign Sanctions Law (AFSL) in 2021. The paper aims at exploring how China’s AFSL has reconfigured the relationship between private autonomy and public policy in contract performance. Prior to the AFSL, the judicial assessments were focused on whether foreign sanctions met the statutory criteria of force majeure under the respective provisions of the Civil Code. This paper argues that the AFSL has fundamentally altered this assessment by introducing a public law element that supersedes and redefines the traditional private law analysis. To illuminate this paradigm shift, the paper introduces a novel analytical model for two-step assessment of sanctions in contract-related disputes. The first step is a public policy filter mandated by AFSL, whereby the courts are expected to assess whether foreign sanctions qualify as a “discriminatory restrictive measure” targeting Chinese citizens or entities. Any contractual non-performance motivated by compliance with sanctions falling under the scope of AFSL can constitute a distinct tort, entitling the affected party to injunctive relief and damages. Contractual clauses that mandate such compliance can be viewed as void due to violation of overriding mandatory law. The second step in the court’s assessment will entail the traditional examination whether foreign sanctions meet the requisite statutory force majeure criteria or fall within the scope of contractual sanctions clauses. Our analysis is both doctrinal and empirical. It involves a textual analysis of the AFSL, its 2025 Implementing Rules, and the relevant provisions of the Civil Code, situating them within China’s conflict-of-laws architecture. This is combined with a qualitative empirical study of more than twenty court judgments rendered before and after the AFSL’s entry into force. By tracing the evolution of judicial reasoning across these cases, the study provides a tangible evidence of the pre-AFSL era of contractual deference to the post-AFSL assertion of public policy. The contributions of this research are threefold. First, it provides a systematic framework for understanding the AFSL’s operation in commercial dispute resolution. Second, it makes an empirical contribution by collecting and synthesizing a dispersed judicial practice to validate its theoretical approach, revealing a clearly defined trend in judicial assessment. Finally, on a conceptual level, the article contributes to broader debate on legal fragmentation and sovereignty by demonstrating how national courts are being employed as instruments of economic statecraft thus inserting public policy imperatives in the commercial transactions.
Biography
Xue Wang is an independent researcher, based in Hong Kong. She used to work as a trainee paralegal in Shanghai, China and currently works as a research assistant at School of Law, City University of Hong Kong. Wang obtained her Bachelor of Laws at Shanghai University of Political Science and Law in 2022 and Master of Laws at City University of Hong Kong in 2024.
