Seeking Certainty and Cooperation in the Face of Escalating Sanctions

Summary

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• The core purpose and effect of sanction-proof clauses is to suspend or discharge a party's contractual obligation where the imposition of sanction on the other party renders the performance of the contract in violation of laws
• Where Chinese entities are involved in sanctions, the newly formed Chinese legal system for anti-foreign sanctions and its impacts must be taken into consideration when negotiating sanction-proof clauses
• Sanction-proof clauses may consist of various parts, and each part should  be carefully considered and formulated with clear and specific wording

I .   More Sanctions against China Prompt the Inclusion of Sanction-Proof Clauses

Recent years have seen escalating tensions between the U.S. and China, and with the exacerbation of the Ukraine Crisis, more and more regions and countries are being dragged in, and forced to pick sides. As Chinese and foreign businesses across various industries have doubtless already noticed, "sanctions measures", as one of the most powerful and frequently used tools in the battle of major countries, have been increasingly applied against China. Examples of the most typical and influential unilateral sanctions are those imposed by the U.S., including the Specially Designated Nationals (SDN) List from OFAC, the Entity List from BIS, and other Acts and Orders from the U.S. President. More recently, the European Union has also been planning to impose sanctions on Chinese enterprises.