EU and UK Secondary Sanctions Target Chinese Companies Under Russia/Belarus Regimes

April 17, 2026

Cross-Border Compliance: The effect of EU and UK Sanctions on Chinese companies

Aline Doussin, Pierre Estrabaud, Chris James, Navpreet K. Moonga, Daniel Shapland Hogan Lovells + Follow Contact LinkedIn Facebook X ;) Embed

Key takeaways

EU and UK sanctions adopted against Russia and Belarus can impact the activities of non-EU and non-UK companies that have strong trading links with Russia and Belarus.

Companies that have no connection with the EU or the UK may become targets of EU and UK sanctions, due to the expansionary scope of the EU and UK’s “secondary sanctions” regimes.

Additionally, in certain circumstances non-EU/UK entities that only have a tangential jurisdictional link to the EU/UK (e.g. through EU/UK ownership or control, or because of EU or UK-national directors or employees), may also be impacted by EU/UK sanctions.

In this alert, we explore the effect of such sanctions specifically in relation to Chinese entities.

Whilst this alert focuses specifically on Chinese entities, the conclusions apply equally to all non-EU/UK entities.
Secondary sanctions are measures which seek to compel individuals or entities to refrain from engaging in activities which undermine the purpose of a country’s sanctions regime, even where the individual or entity has no jurisdictional link to the sanctioning country.

Whilst the US has maintained a formal secondary sanctions regime for many years (for example, by seeking to deter foreign nationals and entities from transacting with parties subject to US sanctions on Cuba and Iran), the EU and UK have traditionally not exercised secondary sanctions powers. Indeed, the EU and UK have traditionally sought to “block” the extra-territorial effect of US secondary sanctions measures.

In this article, we examine recent developments in the EU and UK's Russia and Belarus sanctions regimes that raise new compliance challenges for companies engaging with EU or UK entities/individuals (“EU Persons” and “UK Persons”). In addition, we set out practical steps to manage and mitigate the risks associated with secondary sanctions.

In particular, we consider the following:

1. The applicability of EU and UK sanctions to Chinese companies.
2. The expansion of EU and UK asset freeze designation criteria to increasingly cover Chinese companies.
3. EU companies' liability for the activities of their non-EU subsidiaries.
4. EU companies' compliance obligations concerning contracts for the export of high-risk goods and related IP transfers, which indirectly affect Chinese companies.

1. Applicability of EU and UK Sanctions to Chinese Companies

Generally, EU and UK sanctions apply where activities have an EU or UK nexus.

In the UK, sanctions generally apply to all conduct inside UK territory, and to conduct globally of UK entities (including their overseas branches) and UK nationals. Under EU law, sanctions also typically apply to activities within EU territory or to conduct by EU Persons outside of the EU.

This means that:

1. EU/UK-incorporated subsidiaries of Chinese companies must comply with EU/UK sanctions at all times, and

2. Branches of EU/UK-incorporated companies, even if they are established outside of the EU/UK, must comply with EU/UK sanctions at all times.
   This also means that Chinese-incorporated companies may have to comply with EU or UK sanctions:

3. When operating within the EU or UK. For example, a Chinese employee of a Chinese company, who is located in either the EU or UK, must comply with all applicable EU or UK sanctions whilst they are within EU or UK territory. Similarly, if a China-based employee of a Chinese company travels to the EU or UK for work, any decisions they are involved in whilst located in the EU or UK will have to comply with EU or UK sanctions; and

4. In respect of actions taken by EU or UK nationals outside of the EU or UK. For example, EU or UK national employees located abroad (for example, in China) will have to comply with EU or UK sanctions at all times.

2. Increased listing of Chinese companies on EU and UK sanctions lists (“Secondary Sanctions”)

Under their respective sanctions regimes targeting Russia, the EU and UK have also begun to expand their use of “secondary sanctions” designation powers. Practically, this means that Chinese companies have been added to the EU and UK’s sanctions lists because of their activities in and ties with certain sectors of the Russian economy.

2.1 Listing of Chinese companies as targets of EU and UK asset freeze measures

In 2024, the UK expanded its power to impose sanctions on individuals/entities for “ providing financial services, or making available funds, economic resources, goods or technology ” to persons involved in obtaining a benefit from or supporting the Russian government. 1 The UK is now able to impose asset freeze sanctions – which are very broad economic blocking sanctions - on individuals and entities which it considers meet this definition.

Similarly, since 2023, the EU has expanded the designation criteria under its Russia sanctions regime so that it may impose sanctions measures on individuals/entities for “(i) facilitating infringements of the prohibition against circumvention of [EU sanctions targeting Russia]; or (ii) otherwise significantly frustrating those provisions.” 2

Recent examples of “secondary” sanctions-type designations

Non-EU/non-UK incorporated entities (e.g., Chinese/Indian/other third country companies) which engage in business with Russia have already been targeted by the EU and UK’s “secondary” sanctions designation powers.

For example, the EU’s 18 th sanctions package against Russia announced in July 2025, imposed full sanctions on three entities based in China that supply goods used by Russia’s military. The EU targeted these specific companies, claiming that their actions are either “ supporting actions which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine ” or “ supporting materially Russia’s military and industrial complex. ” [3] In February 2025 the UK designated several Chinese suppliers of machine tools, electronics, and dual-use goods used by Russia’s military. In its most recent package of sanctions in February 2026, the UK designated several more Chinese suppliers of dual-use goods and technology used by Russia’s military, as well as Chinese entities involved in supporting the Russian energy sector.

Where such entities have been designated, EU Persons and UK Persons, respectively, are prohibited from engaging in any business transactions or economic dealings with them, whether conducted directly or indirectly. These are very broadly drafted economic blocking sanctions with broad-ranging effect.

This means that in cases where Chinese companies have ongoing business relationships involving EU/UK Persons, the potential impact on their business from being designated under EU or UK sanctions will be significant because EU/UK Persons will not be able to continue the business relationship with such a designated Chinese company.

Non-EU incorporated entities (e.g. Chinese/Indian/other third country companies) may also be targeted through specific transaction bans. For example, the EU's 19 th sanctions package against Russia announced in October 2025, added 12 Chinese companies to a list of entities to which EU Persons must not sell, supply, transfer or export dual-use goods and technology. This is because these Chinese companies have been identified by the EU as providing direct or indirect support to Russia's military industrial complex or engaging in EU sanctions circumvention.

Given these circumstances, many Chinese companies are assessing their exposure to Russia – in particular the extent to which their activities “ [provide] financial services, or [make] available funds, economic resources, goods or technology ” to persons involved in obtaining a benefit from or supporting the Russian government, “ [support] actions which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine ” or “ [support] materially Russia’s military and industrial complex. ” Because these activities may place non-EU and non-UK companies at particular risk of being designated under EU/UK “secondary” sanctions. For example, the UK government has drawn particular attention to this risk for Georgian businesses in sanctions guidance, accessible: here.

2.2 Listing of Chinese companies on the EU’s export prohibition list

The EU has adopted measures aimed at prohibiting EU exporters from circumventing its prohibitions on export to Russia by exporting via third countries such as China. One of these anti-circumvention tools is a prohibition on the export of certain sensitive items (and a prohibition on providing related services) to certain listed companies that, according to the EU, re-export such sensitive items to Russia or Belarus.

The list of restricted companies is set out in Annex IV of EU Regulation 833/2014 and Annex V of EU Regulation 765/2006. These lists include several companies incorporated in Mainland China and Hong-Kong. To some extent, these lists are the EU’s equivalent to the US’ BIS Entity List, with a substantial nuance which is that licensing grounds under EU law are very limited. In practice, being named in such a list by the EU will mean EU Persons cannot ship in-scope items to that company.

2.3. Listing of Chinese financial institutions and Chinese subsidiaries of Russian financial institutions on the EU’s transaction ban lists

As part of its effort to tackle Russia’s financing network, the EU has imposed transaction bans against:

• Entities established outside Russia that use the SPFS of the Central Bank of Russia or equivalent specialised financial messaging services set up by the Central Bank of Russia or the Russian State; and
• Credit and financial institutions and entities providing crypto assets services that (i) are significantly frustrating the purpose of the EU Russia and Belarus sanctions regimes and (ii) support Russia’s war of aggression against Ukraine. These transaction bans have for now been focused on the Chinese subsidiaries of Russian banks and on a few Chinese banks.

3. EU: Subsidiary Conduct Liability

On 24 June 2024, the EU’s 14 th sanctions package included the addition of Article 8a to Council Regulation (EU) No 833/2014 (the “EU Russia Sanctions Regulation”) and Article 8i to Council Regulation (EC) No 765/2006 (the “EU Belarus Sanctions Regulation”). These articles require EU entities to use their “best efforts” to ensure that any non-EU entity/person that they own or control (i.e. their non-EU subsidiaries) does not participate in activities which “undermine” its sanctions on Russia and Belarus.

In line with the recitals of the amending regulations, Commission guidance has clarified that “best efforts” means “all actions that are necessary.” This is, however, limited to what is “suitable” or “feasible”, given the factual circumstances, the nature and size of the EU person, and the degree of control that the EU person has over the relevant non-EU entity.

Examples of such “undermining” activities could include:

• Dealings with persons/entities subject to asset freezes (even indirectly) and/or to transaction bans;
• Exporting goods/technology subject to export controls, or investments in certain prohibited sectors within Russia.
• Licensing or transferring intellectual property rights and trade secrets (“IPTS”) related to restricted goods and technology. Chinese companies with EU shareholders may thus be subject to increased limits and conditions around the transfer and use of IPTS from the EU. Impact on Chinese companies

Chinese companies which are majority-owned or otherwise controlled by EU Persons will be indirectly caught by Articles 8a/8i. ** Therefore, such ** Chinese companies can expect their EU parent companies to exercise scrutiny on any transaction which, if it were to be carried out by an EU entity, would “undermine” the EU Russia Sanctions Regulation or EU Belarus Sanctions Regulation.

Given that the European Commission has recommended that EU companies seek awareness of the activities of any non-EU entities which they own or control, Chinese companies may expect strengthened group compliance programmes, including mandatory reporting, mandatory sanctions training for staff, as well as procedures to rapidly react to sanctions violations.

Chinese companies may wish to assess whether such requests from their EU parent companies are in line with Chinese law, as this could be a key part of the “best efforts” analysis. The liability of the EU parent company may be determined based on what is “feasible” and “suitable” from their perspective, which in our experience requires a nuanced assessment of the factual and legal context in which a third-country incorporated entity is operating.

4. EU: Compliance Obligations Applicable to Activities Relating to Certain Sensitive Items

4.1 Risk Assessment

Also introduced within the EU’s 14 th package of sanctions against Russia, Article 12gb of the EU Russia Sanctions Regulation and Article 8ga of the EU Belarus Sanctions Regulation require EU exporters of Common High Priority Items to conduct risk assessments regarding such goods reaching Russia. The Common High Priority Items List (Annex XL of the EU Russia Sanctions Regulation and Annex XXX of the EU Belarus Sanctions Regulation) comprises dual-use goods and advanced technology items used in Russian/Belarusian military systems which have been found on the battlefield in Ukraine, or are critical to the development, production or use of those Russian/Belarusian military systems.

Impact on Chinese Companies

EU Persons are required to actively implement appropriate policies, controls and procedures under Articles 12gb/8ga, and therefore Chinese companies which import such goods from EU Persons should prepare for enhanced compliance and due diligence requirements from those EU Persons.

EU Persons are also required under Articles 12gb/8ga to ensure that any third-country entity owned or controlled by that EU Person and trading Common High Priority Items implements the same policies, controls and procedures. Such Chinese subsidiaries of EU Persons should therefore assess whether their compliance policies and procedures are in-line with EU guidance and identify areas where such compliance policies require enhancement.

4.2 Obligation for EU Exporters to Include a “No Export to Russia” Clause

Article 12g of the EU Russia Sanctions Regulation and Article 8g of the EU Belarus Sanctions Regulation were introduced as part of the EU’s 12th package of sanctions against Russia/Belarus. As of 20 March 2024, Articles 12g/8g have required contractual provisions be entered into by third country (e.g. Chinese) importers of certain categories of goods and technology (“ Restricted Goods”), prohibiting the re-export of these goods to or for use in Russia/Belarus.

Articles 12g/8g also require that such contracts contain a provision for "adequate remedies" should the third-country importer/buyer of the Restricted Goods breach the "no re-export to Russia/Belarus" prohibition, and for EU exporters to inform their governments if a “no re-export to Russia/Belarus” clause is breached. This is designed to ensure that EU exporters cannot turn a blind eye to the re-export to Russia/Belarus of Restricted Goods they sell, supply, transfer or export to third countries.

Impact on Chinese companies

Chinese companies acquiring Restricted Goods from EU entities may therefore be contractually prohibited from re-exporting such goods to or for use in Russia/Belarus.

EU guidance also makes clear that EU exporters should draft this contractual clause such that Chinese companies acquiring Restricted Goods from the EU are themselves required to use their best efforts to ensure that those goods are not supplied to or for use in Russia/Belarus further down the commercial chain, including by possible resellers. Therefore, when such clauses are included in commercial contracts, it places an active duty on such Chinese companies to take steps to prevent any non-EU third parties acquiring the Restricted Goods from the original Chinese importer from providing those goods either to or for use in Russia/Belarus. This duty applies even in cases where parties further down the commercial chain are not EU entities and have no existing links to the EU.

When such clauses have been included by the EU exporter in the contract with the immediate buyer, this requirement therefore also applies to Chinese companies which acquire Restricted Goods from a non-EU entity, where the goods originate from the EU. Contractually, these Chinese companies will themselves be barred from re-exporting the goods to or for use in Russia/Belarus, as doing so falls within the restriction against parties further down the commercial chain re-exporting to Russia/Belarus.

Chinese companies should therefore review whether they intend to acquire any Restricted Goods from the EU, and if so whether their contracts with their supplier include such clauses. They should also assess the safeguards that can be implemented in order to prevent the goods from being provided to Russia/Belarus by parties further down the commercial chain.

UK official guidance also suggests that UK companies include clauses requiring Chinese companies acquiring goods controlled by the UK not to re-export such goods to or for use in Russia. This means that in practice the substance of the above Regulation 12g requirements on Chinese companies can also effectively apply to Chinese companies acquiring goods from the UK.

4.3. Required contractual clauses in IP contracts

Article 12ga of the EU Russia Sanctions Regulation requires all EU Persons to include a contractual clause in agreements for the sale, license or transfer in any other way of IPTS as well as granting rights to access or re-use any material or information protected by such IPTS, related to items in the Common High Priority Items List. This clause must prohibit third-country commercial counterparts, and require them to prohibit possible sublicensees of such IPTS, from using such IPTS or other information in connection with such items that are intended for sale, supply, transfer or export, directly or indirectly, to Russia or for use in Russia.

Impact on Chinese companies

Chinese companies seeking to acquire, access or re-use IPTS from EU Persons should therefore assess in advance whether their intended use would breach a "no use of IP rights in relation to Russia" clause, as EU Persons are legally obliged to require such Chinese counterparties to agree to this restriction.

This requirement will not only impact Chinese companies negotiating the acquisition or use of IPTS going forward, but also Chinese companies which have previously entered into such contracts prior to 25 June 2024. EU counterparties to these contracts must have either amended them appropriately or wound them down, as not including the full “no use of IP rights in relation to Russia” language in relevant agreements amounts to a breach of the EU Russia Sanctions Regulation. Similarly, not reporting to the competent authorities a breach of the clause by a Chinese counterpart would also amount to a breach.

In light of the above requirements, we suggest that Chinese companies take the following steps:

• Non-EU owned or controlled Chinese companies:
• Map business they conduct directly or indirectly involving the Russian government, EU/UK-designated persons, or entities operating in strategic/defense sectors within Russia, and assess whether these activities could place any Chinese company at risk of EU/UK sanctions designation.
• Consider implementing, when necessary, appropriate measures to ensure that Chinese activities are not involving an EU or UK nexus inadvertently.

• Review any proposed acquisition of Restricted Goods from the EU and UK and ensure that the consequences of any sanctions compliance contractual clause have been adequately identified.

• Assess in advance whether any intended use of IPTS acquired or accessed from EU Persons would breach a "no use of IP rights in relation to Russia/Belarus" clause.

• Chinese companies owned or controlled by an EU Person:

• Review Russian/Belarusian-related business activities in order to assess the extent to which such business activities might undermine EU sanctions.

• Assess whether compliance policies and procedures are in-line with EU guidance and identify areas where such compliance policies require enhancement.
  References

1. Regulation 3(b) of the Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2024.
2. Article 3(h) of Council Regulation (EU) 269/2014 of 17 March 2014 (as amended).
3. For example, see designations of Wuhan Global Sensor Technology Co. Ltd (武汉高芯科技有限公司) and Shandong ODES Industry Co. Ltd (山东奥德斯工业股份有限公司) within Council Implementing Regulation (EU) 2025/1476 of 18 July 2025 implementing Regulation (EU) No 269/2014. [View source.]

;) ;) Report

Related Posts

• Working time compliance across borders: Practical insights for employers
• Resolving reinsurance conflicts: The battle of jurisdiction and arbitration in cross-border contracts
• Cross-border SEC spotlight: Annual FPI wrap – developments and trends impacting the 2025 annual report on Form 20-F

Latest Posts

• Vietnam accelerates IP process: Pros and cons of the new timelines for IP owners
• UK government consults on new NDA restrictions See more »

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
Attorney Advertising.

©
Hogan Lovells

Written by:

Hogan Lovells Contact + Follow Aline Doussin + Follow Pierre Estrabaud + Follow Chris James + Follow Navpreet K. Moonga + Follow Daniel Shapland + Follow more less

PUBLISH YOUR CONTENT ON JD SUPRA

• ✔ Increased readership
• ✔ Actionable analytics
• ✔ Ongoing writing guidance Join more than 70,000 authors publishing their insights on JD Supra

Start Publishing »

Published In:

Asset Freeze + Follow Blocking Sanctions + Follow China + Follow Compliance + Follow Cross-Border Transactions + Follow Due Diligence + Follow Economic Sanctions + Follow EU + Follow Export Controls + Follow Foreign Entities + Follow Foreign Policy + Follow International Trade + Follow Risk Management + Follow Sanctions + Follow Secondary Sanctions + Follow Subsidiaries + Follow Third Country Entities (TCEs) + Follow UK + Follow General Business + Follow Finance & Banking + Follow International Trade + Follow more less

Hogan Lovells on:

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra: Sign Up Log in ** By using the service, you signify your acceptance of JD Supra's Privacy Policy.* - hide - hide