A finding China can’t ignore: the South China Sea arbitration
19 Jul 2016|

Image courtesy of stratman

The unanimous decision of the five-member Arbitral Tribunal in favour of the Philippines in its South China Sea case against China is breathtaking in its scope and will have profound consequences for regional geopolitics for decades. While the Arbitration Award and the processes associated with it have been completely rejected by China—to the point that it returned the formal documents to the Philippines it was served in January 2013—China will find that it’s not so easy to completely ignore the legal precedent set by the Award.

The Philippines commenced proceedings in 2013, provoked by ongoing disagreements with China over their respective South China Sea claims and particularly over the Scarborough Shoals, a series of reefs between the western Philippines and the Spratly Islands. The Philippines based its claims upon sovereign rights and jurisdictional entitlements found in the 1982 United Nations Convention on the Law of the Sea (UNCLOS) which it had ratified in 1994 and China ratified in 1996. UNCLOS sought to significantly recalibrate the maritime entitlements of coastal states such as China and the Philippines by recognising a 12-nautical-mile territorial sea, and 200 mile EEZ and continental shelf.

Importantly for the South China Sea, Article 121 of UNCLOS also made clear that islands, including those of archipelagos such as the Philippines, generated the same entitlements. Rocks, on the other hand, under Article 121 (3) of UNCLOS only enjoyed a territorial sea. Unhelpfully, UNCLOS didn’t clearly define the distinction between islands and rocks, and previous decisions of international courts and tribunals had either been too case-specific or too reluctant to precisely define a rock to be of much assistance in the South China Sea context.

The Philippines had options in commencing these proceedings as a result of the compulsory dispute resolution procedures available under Part XV of UNCLOS, which allow for both judicial settlement before standing courts and arbitration before an ad hoc tribunal specially convened to hear the dispute. The Philippines chose arbitration before a five-member panel and utilising mechanisms under Annex VII of UNCLOS nominated its preferred arbitrator. However, because China rejected the proceedings, default mechanisms were activated under which the remaining arbitrators were chosen by the President of the International Tribunal for the Law of the Sea, who at the time was Judge Yanai of Japan. Despite China’s refusal to participate in the proceedings, the Tribunal continued to operate under default of appearance mechanisms designed to circumvent such actions. One consequence of this was that the Philippines bore all of the institutional costs of the Arbitration, including payment of the fees of the Arbitrators.

In October 2015 the Tribunal found it had jurisdiction and in doing so dismissed China’s objections that this was a dispute over territorial sovereignty and maritime boundarieswhich would‘ve been grounds for finding against the Philippines. The 12 July Award also considered the outstanding issue of jurisdiction with respect to whether the case dealt with an historic title claim by China to the South China Sea, which directly raised the status of China’s ‘nine-dash line’ claim. Again the Tribunal ruled against China and found that the ’nine-dash line’ claim wasn’t akin to historic title. It’s principally because these three legal arguments challenging jurisdiction were dismissed that China has been so critical of the Award.

At the Merits phase of the case, the Philippines succeeded on nearly every argument it presented. This included that there was no basis in UNCLOS for the ’nine-dash line’, that none of the relevant maritime features in the South China Sea were islands but rather UNCLOS Article 121 (3) rocks entitled only to a territorial sea, that China’s land reclamation activities and building of artificial islands infringed the environmental rights of the Philippines, and that China had tolerated environmentally damaging fishing practices.

The big question is where to now in this dispute? The Award is final and binding. There’s no right of appeal and the decision cannot be annulled by the UN. To date, the Philippines has been calm and measured in its response. It has the high moral ground in having taken the dispute to an agreed arbitration process before respected international jurists. China’s short-term position is that it will not accept the decision but remains open to negotiations.

While the Award doesn’t immediately confer upon the Philippines enforceable rights, it’s created an important precedent with respect to the legality of the ’nine-dash line’, the status of islands and rocks, and land reclamation and artificial island building activities. Using this as a legal benchmark, the Philippines and its South China Sea neighbours will rely upon the Award as they seek to reach settlements with China over their maritime disputes. Importantly, given the Tribunal’s decision that many of the contested rocks in the South China Sea don’t generate an EEZ and continental shelf, the inherent value of these features has now been diminished and territorial tensions may cool.