Compliance dilemma

A compliance dilemma arises when a firm faces materially conflicting legal demands across jurisdictions. The conflict is transaction-specific. It depends on the regulated person, prohibited conduct, territorial connection, licence or authorisation route and consequence under each instrument. The existence of overlapping sanctions and countermeasure laws does not mean that no multinational can comply with both systems in every case.

Chinese regimes

China's Unreliable Entity List provisions, effective from September 2020, establish a process for investigating and listing foreign entities and permit specified restrictions. The Anti-Foreign Sanctions Law is a separate statute. A State Council regulation issued in March 2025 provided an implementation framework for that law.

China added another distinct layer in April 2026 through rules concerning counteraction against unjustified extraterritorial application of foreign laws and measures. These instruments should not be collapsed into one timeless anti-sanctions rule. Each has its own trigger, decision process, available measure and potential relief route.

European Union regime

The European Union Blocking Statute protects covered European Union operators from the effects of specified extraterritorial laws listed in its annex. It can prevent recognition of certain foreign judgments, permit recovery of damages and prohibit compliance with listed foreign requirements. It also allows an operator to seek Commission authorisation where non-compliance would seriously damage its interests or those of the Union. It is not a general ban on compliance with every foreign sanction.

Assessment

A publishable conflict analysis should map both laws before asserting incompatibility. It must state who is regulated, what act is required or forbidden, where the act occurs, and whether a licence, exemption, authorisation or judicial remedy is available. Deliberate trap-setting is an intent claim and requires evidence beyond overlap.

The strategic effect is still significant. Even where legal compliance remains possible, uncertainty, delay and exposure can change investment, payment and supply-chain decisions. The dilemma may weaken a compliance cascade without making simultaneous legality universally impossible.

See also

Anti-sanctions architecture | Anti-Foreign Sanctions Law (China, 2021) | EU Blocking Statute (Regulation 2271/96) | Compliance cascade

Sources

• Ministry of Commerce of the People's Republic of China, Provisions on the Unreliable Entity List, 19 September 2020.
• State Council of the People's Republic of China, regulation implementing the Anti-Foreign Sanctions Law, 24 March 2025.
• National People's Congress of the People's Republic of China, official account of adoption of the Anti-Foreign Sanctions Law, 11 June 2021.
• State Council of the People's Republic of China, rules concerning unjustified extraterritorial application of foreign laws, 13 April 2026.
• European Commission, Extraterritoriality and the Blocking Statute, accessed 29 July 2026; Council Regulation (EC) No 2271/96.