Extraterritoriality of American and Chinese laws: challenges and implications for French companies

The extraterritoriality of foreign legislations represents a major strategic issue for French companies operating abroad. Faced with significant compliance requirements and risks of sanctions, they must navigate a complex and constantly evolving legal environment.

After recalling the main extraterritorial regulations in force, this article outlines the practical consequences faced by French companies subject to them, as well as practical recommendations.

1. The extraterritoriality of american laws

The United States adopts a very extensive interpretation of the extraterritoriality of its laws, which compels many foreign companies to comply with them even outside the United States.

1.1 A regulatory framework with global reach

The main U.S. regulations with extraterritorial application include:

• The Foreign Corrupt Practices Act (FCPA), which prohibits the bribery of foreign public officials and imposes strict compliance obligations such as conducting compliance audits. Its extraterritorial application extends to foreign companies as soon as a connection with the United States is identified, such as dollar transactions or the use of U.S. financial or IT infrastructures.
• The Clarifying Lawful Overseas Use of Data Act (CLOUD Act), which allows U.S. authorities to access computer data stored, including outside U.S. territory, by service providers established in the United States.
• The International Emergency Economic Powers Act (IEEPA), which authorizes the U.S. government to impose economic sanctions against foreign entities perceived as a threat to national security.
• The economic sanctions issued by the Office of Foreign Assets Control (OFAC), which impose trade restrictions on entities linked to certain sanctioned countries or individuals. These sanctions can be primary (targeting “U.S. Persons”) or secondary (targeting foreign companies dealing with entities under U.S. embargo). OFAC has a very stringent enforcement arsenal including imprisonment, financial penalties that can amount to several million dollars, or even exclusion from the U.S. market.

1.2 Having a direct impact on French companies operating in the United States

The obligations imposed by these regulations directly concern French companies, especially when they:

• Conduct transactions in U.S. dollars or use the services of an American bank or a bank established in the United States;
• Have a presence, a subsidiary, business partners in the United States, employ American employees, or when their shares are traded on an American stock exchange;
• Integrate technologies or components of American origin into their supply chains, subjecting them to export control rules.

Several French groups have already been subject to substantial sanctions. A French bank was notably fined a record $8.9 billion in 2014 for violating American embargoes.

2. The extraterritoriality of chinese laws

Unlike the United States, China initially developed extraterritorial measures with a defensive perspective. However, in 2020, the Chinese government decided to strengthen its legal arsenal to impose its own standards on foreign economic actors.

2.1 An expanding regulatory framework

The main extraterritorial provisions notably include:

• The list of unreliable entities (Unreliable Entity List) established in September 2020, aims to sanction foreign companies (i) that would harm China’s sovereignty, security, or development or (ii) that violate normal market rules causing harm to the interests of Chinese companies by interrupting their transactions with them or by taking discriminatory measures against them. Companies listed on the Unreliable Entity List are prohibited from participating in import and export activities in China and from investing in the country. This prohibition can be combined with financial or criminal sanctions. Since the beginning of 2025, China has added about ten American companies to this list.
• The law against foreign sanctions and the regulation against the unjustified extraterritorial application of foreign laws and measures of 2021 aims (i) to deter Chinese and foreign companies established in China from complying with foreign extraterritorial rules and, (ii) to prohibit Chinese or foreign companies established in China from complying with foreign sanctions deemed discriminatory against Chinese interests. They have been invoked to compel certain companies not to sever their ties with Chinese entities under embargo, notably in response to U.S. sanctions against the company Huawei.
• The export control law of December 2020, supplemented in 2024 by a Regulation on the export control of dual-use goods, subjects certain categories of technologies and strategic resources to restrictions. China has notably added restrictions on the export of critical minerals like gallium and germanium, essential to high-tech and defense industries. The sanctions regime is significant: warning, license suspension, confiscation, fine up to $8 million or 10 times the gains from illicit activities.
• The personal data protection law (“PIPL”) of August 2021 imposes strict restrictions on cross-border data transfers, drawing inspiration from the European GDPR, and emphasizes data sovereignty. It imposes administrative supervision for any transfer of so-called important data (likely to harm national security or Chinese public interest in case of destruction or disclosure), for any transfer of a significant volume of data, or for any transfer by an information system operator in sensitive industries like energy, defense, and public services. For other personal data, their transfer outside China requires the recipient to sign a standard contract obliging them to comply with Chinese law provisions.

2.2 Having increasingly significant consequences for French companies

Companies operating in China or having business relations with Chinese partners must anticipate several challenges:

• The PIPL has led to a movement of localizing certain data on Chinese territory, and for some actors, a complete separation of China from global information systems, making cross-border flows complex for French multinationals.
• The possible restriction of access to the Chinese market in case of alignment with Western and especially American sanctions, creating uncertainties for companies operating both in China and the United States.
• Increasing complexity in managing regulatory and contractual risks, especially for companies operating in sensitive sectors such as telecommunications, artificial intelligence, and semiconductors.

3. The french response to extraterritoriality

In the face of these potential foreign interferences, France has also implemented legal tools aimed at protecting its companies, limiting the application of foreign extraterritorial regulations, and, if necessary, enforcing its own regulatory framework abroad.

3.1 The extraterritoriality of French criminal law

French criminal law provides mechanisms to sanction acts committed abroad when they involve French interests, particularly when the perpetrator or the victim is French, or when part of the offense was committed on French territory. The rules regarding the fight against corruption, especially of foreign public officials, also allow French authorities to intervene in criminal prosecutions against foreign entities.

3.2 The blocking statute: a bulwark against foreign interference

Law No. 68-678 of July 26, 1968, known as the “blocking statute”, prohibits, subject to international treaties or agreements, French companies from transmitting to foreign public authorities, or within the framework of foreign judicial or administrative procedures, information or documents of an economic, commercial, industrial, financial, or technical nature whose communication could harm the sovereignty, security, or essential economic interests of France.

Companies receiving information requests from foreign authorities must inform the Strategic Information and Economic Security Service (SISSE), which plays a crucial role by issuing an opinion on the applicability of the blocking law to the requested information. Several U.S. jurisdictions have recently recognized the application of this law, thus compelling American companies to resort to the judicial assistance mechanisms provided by international treaties.

Conclusion

The extraterritoriality of foreign legislations and their extension is a complex legal challenge, requiring increased vigilance and an adapted legal strategy. France, through its criminal law and blocking law, has protection mechanisms whose effectiveness largely depends on the commitment of economic and institutional actors.