China's Ministry of Justice Invokes Anti-Extraterritorial Jurisdiction Regulation Against EU Investigation for First Time

China’s Ministry of Justice Wields the Regulations on Countering Improper Extraterritorial Application of Foreign Laws Against the EU for the First Time: The Contest over Technological Sovereignty Escalates to the Red Line of Judicial Jurisdiction

In July 2024, China’s Ministry of Justice issued a carefully worded yet unequivocal announcement: following lawful review, it determined that the European Commission’s cross-border investigation into Nuctech Company Ltd. — conducted under the EU’s Foreign Subsidies Regulation (FSR) — constitutes “improper extraterritorial application of foreign law,” as defined by the People’s Republic of China Regulations on Countering Improper Extraterritorial Application of Foreign Laws. This marks the first time since the Regulation entered into force in 2021 that China has publicly and formally imposed judicial countermeasures against the EU, grounded explicitly in statutory provisions. Far from an isolated incident, this move signals a pivotal evolution in China’s technological sovereignty strategy—the arena of contest is shifting quietly but decisively from industrial policy tools (e.g., export controls on semiconductor equipment, quotas on rare-earth processing) toward the more foundational domain of judicial jurisdiction. Thus, Sino-European regulatory competition has now entered the “deep legal waters” of jurisprudence.

I. Precision Targeting Through Legal Countermeasures: Drawing an Unbreachable Red Line Against “Unnecessary Requests for Domestic Information”

Article 3 of the Regulations on Countering Improper Extraterritorial Application of Foreign Laws explicitly stipulates that foreign laws or measures constitute improper extraterritorial application if they (i) lack a “genuine, reasonable, and verifiable jurisdictional nexus,” and (ii) require Chinese citizens, legal persons, or other organizations to provide data or documents located within China’s territory or to submit to overseas investigations. In its determination, the Ministry of Justice found that the EU’s investigation into Nuctech centered on demands for access to the company’s R&D processes, supply-chain contracts, and customer data—all of which are physically situated and generated entirely within China. The relevant transaction parties, contract performance locations, and data storage sites all lie squarely within China’s territory and bear no substantive connection to the EU Single Market. In essence, under the pretext of “preventing market distortion,” the EU seeks to conduct a “penetrative extraction” of China’s core commercial secrets—thereby breaching the universally recognized principles of territorial jurisdiction and reasonable connection enshrined in international law.

This determination carries strong precedential weight. It does not amount to a blanket rejection of EU regulation; rather, it precisely targets the expansionist tendencies exposed during implementation of the FSR. Should the Regulation be applied, for example, to investigate CATL’s local procurement agreements at its Hungarian battery plant—or Mindray Medical’s R&D funding flows through its German subsidiary—the same compliance risk of “unnecessary requests for domestic information” would likely be triggered. In-house legal departments of multinational enterprises must now recognize clearly: integrating a “China Legal Pre-Review” node into their EU compliance architecture is no longer optional—it is existential. Any materials submitted to EU regulatory authorities that pertain to operational details within China must first undergo filing and assessment by China’s Ministry of Justice; failure to do so may trigger an “order to block enforcement” and subsequent penalties under Article 12 of the Regulation.

II. Short-Term Market Sentiment Shock vs. Long-Term Structural Reconfiguration: Tech Stocks Under Pressure Accelerate “Compliance Autonomy”

On the day the policy signal was released, Chinese tech stocks listed abroad came under immediate pressure. The NASDAQ Golden Dragon China Index plunged 3.2% intraday, with sectors including security surveillance and intelligent transportation registering the steepest declines. Market concern stems not from the Nuctech case alone, but from anticipation that the EU may broaden the scope of FSR investigations—if extended to critical new-energy component suppliers such as photovoltaic inverter manufacturers or wind-power control system vendors, it would directly undermine the regulatory predictability essential for China’s green technology exports.

Yet pressure also catalyzes structural transformation. In the short term, A-share-listed companies in affected sectors are rapidly building a “dual-track compliance system”: first, strengthening specialized compliance teams focused on EU regulations—including the GDPR and FSR; second, establishing a “Domestic Data Sovereignty Management Platform” in collaboration with institutions such as the China Academy of Information and Communications Technology (CAICT), enabling localized encryption of R&D data, tiered approval for cross-border data transfers, and full-chain audit-log evidence preservation. More profoundly, this is driving supply-chain reconfiguration. In the lithium battery sector, for instance, Ganfeng Lithium disclosed that its current lithium salt inventory days are at a historic low—not merely reflecting robust demand, but revealing an urgent industry-wide need for “compliance-verified inventory.” Companies are no longer optimizing solely for inventory turnover rates; instead, warehousing nodes and logistics information systems that meet China’s security assessment requirements for cross-border data transfers are now integral to evaluating supply-chain resilience. This effectively shifts domestic enterprises from “passively adapting to external rules” toward “actively defining compliance benchmarks.” “Compliance autonomy” is thus emerging as the third pillar—alongside “technological autonomy” and “production capacity autonomy.”

III. Paradigm Upgrade in Geopolitical Regulatory Competition: From Industrial Rivalry to Contest over Legal Order

This countermeasure must be understood within a broader landscape of regulatory contest. Recent U.S.-China presidential talks yielded institutional arrangements—including the establishment of Trade and Investment Councils—reflecting both sides’ pragmatic pursuit of “managed competition-cooperation” in economic and trade domains. By contrast, the Sino-European clash over judicial jurisdiction reveals a parallel front line: the struggle for dominance in setting global technical standards and legal order. The EU seeks to project its regulatory logic worldwide via instruments like the FSR and the Digital Markets Act (DMA)—a phenomenon often termed the “Brussels Effect.” China, meanwhile, leverages the Regulations on Countering Improper Extraterritorial Application of Foreign Laws as a fulcrum, reinforcing it with the Data Security Law and the Personal Information Protection Law to erect a “regulatory firewall,” declaring unequivocally that “final interpretive authority over matters occurring within China’s territory rests with China’s judicial organs.”

Such jurisprudential confrontation proves more enduring and pervasive than tariff wars. It compels multinationals to make a fundamental strategic choice in their global operations: Shall they build a single, Brussels-centered compliance framework—or accept three parallel (and sometimes conflicting) regulatory regimes emanating from Beijing, Washington, and Brussels? The answer is becoming increasingly clear: leading enterprises have already appointed “Global Regulatory Coordination Officers” at the board level. Their core mandate is no longer simply risk avoidance—but proactive participation in regulatory dialogues among China, the U.S., and the EU, embedding Chinese concerns at the earliest stages of standard-setting. This is precisely the strategic depth behind the Ministry of Justice’s action: it does not seek short-term victory, but rather secures for China’s legal discourse an indispensable seat at the table—ensuring China’s agenda-setting power in the global rule-making process.

When the Ministry of Justice’s official announcement text forms a subtle, intertextual dialogue with Ganfeng Lithium’s inventory data and investor Zijin Chen’s cautious positioning in consumer stocks, what emerges is not merely a policy signal—but the nascent sprouting of a new economic ecosystem. Within it, compliance capability is productive capacity; legal sovereignty is technological sovereignty; and a firm’s ultimate competitive edge lies in its ability to forge a genuinely autonomous governance core amid the tensions of multiple, overlapping regulatory orders.