The Reality of Dealmaking Amid Competing US-China Sanctions

Summary

• China's burgeoning sanctions regime emboldening Chinese parties in contractual negotiations
• One-sided terms favoring foreign parties no longer feasible 
• Traditional global compliance strategies unable to keep up with competing compliance requirements

With China building up its arsenal of countermeasures in response to sanctions imposed by other countries, foreign companies are finding it more difficult to mitigate the sanctions-related risks of their deals through contractual terms. Although the risk of conflicts of laws in dealmaking is not a new phenomenon, heightened tensions between China and countries like the United States have considerably raised the stakes for both sides in a deal.

The emerging sanctions landscape pits long-established U.S. sanctions and export controls on the one side against Chinese retaliatory measures on the other, with both bearing extraterritorial implications. The compliance challenge is particularly acute for U.S. companies with substantial operations in China, as well as Chinese companies that rely on access to the U.S. dollar to carry out cross-border transactions.