EU Subsidiaries in China Not Immune From Russia-Related Compliance Challenges, Firm Says
Although EU export controls and sanctions on Russia don’t necessarily apply to Chinese-based subsidiaries of EU companies, European businesses should keep in mind that they can’t use their Chinese business to circumvent the restrictions, law firm CMS said in an April 21alert. Chinese subsidies are “incorporated under Chinese law” and “not, in principle, bound by the measures,” but their EU parent companies can’t use them to evade any “obligations that apply to the EU parent company,” the firm said. This includes “delegating to them decisions which run counter to the sanctions, or by approving such decisions by the Chinese subsidiary.”
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EU nationals working for a Chinese subsidiary are “personally bound” by EU sanctions and can be held liable for participating in transactions that violate the sanctions, the firm said. “Even if the Chinese company itself entered the transaction," CMS said, "EU nationals facilitating the transaction could still be covered by the anti-circumvention clause if they ‘participate in activities’ the object or effect of which was to circumvent the main prohibition."