On 12 July 2016, the UN’s Permanent Court of Arbitration handed down its ruling on the South China Sea Arbitration, rendering a unanimous Award in favour of the Philippines in its case against China.  As the situation continues to develop, examining the facts of the case sheds light on the arguments that China is looking to counter.  The proceedings were issued by the Philippines in 2013 under Annex VII of the United Nations Convention on the Law of the Sea (UNCLOS) in response to a year-long maritime stand-off with China over the Scarborough Shoal, a reef in the South China Sea. The Philippines’ case asked the Court to rule on four separate issues:

1.    The Phillipines’ and China’s source of rights in the South China Sea.

2.    The legal status of particular maritime features in the South China Sea including the Scarborough Shoal and an island archipelago known as the Spratlys.

3.    The extent to which China has violated UNCLOS through its various actions in the South China Sea including dredging, over-fishing and harm to the environment.

4.    The extent to which China has aggravated the dispute since the proceedings were initiated in 2013.

Background

The dispute over the South China Sea relates to territorial claims over ocean areas, two groups of islands known as the Paracels and the Spratlys and dozens of rocky outcrops, atolls, sandbanks and reefs such as the Scarborough Shoal.  The sea is a major shipping route which hosts over half of the world’s merchant tonnage and the islands are thought to be rich in natural resources such as gas and oil. China claims the largest portion of the territory – an area delineated by the “nine-dash line” which stretches hundreds of kilometres south and east of its most southerly province, Hainan.  China bases its claim to the territory within the “nine-dash line” on historic rights, arguing that it has had the exclusive possession of the area for centuries.

Over the past few years China has exercised increasing militarisation in the area within the nine-dash line, including building an air strip on the Spratlys, stationing naval ships in strategic positions and building artificial islands on top of islets, fitted out with military structures.  These actions have elicited a strong international response, particularly from the United States, which has undertaken a series of military manoeuvres in the South China Sea to assert freedom of navigation in the sea and rebuke China’s claims to sovereignty.

The South China Sea Arbitration

Jurisdictional Issues

The proceedings were issued under UNCLOS’s arbitration mechanism, which allows signatories to the Convention to initiate arbitral proceedings in order to resolve disputes over maritime areas.  UNCLOS is an international agreement governing the rules of the sea and came into force in 1994.  Relevantly, UNCLOS provides that a country has sovereignty over waters extending 12 nautical miles from its coast, and controls economic activities in water up to 200 nautical miles from its coast.  While both China and The Philippines ratified the treaty, China has refused to participate in the proceedings, arguing that the Permanent Court of Arbitration has no jurisdiction in the matter.

In December 2014 China issued a position paper on the issue of jurisdiction in the arbitration.  Its argument was two-fold.  Firstly, it stated that the subject matter of the arbitration was the territorial sovereignty over several maritime features in the South China Sea.  China argued that because these are land features, UNCLOS does not apply.  Secondly, China argued that China and the Philippines had agreed through bilateral instruments to settle their relevant disputes in the South China Sea through bilateral negotiations.  China said that by unilaterally initiating the arbitration, the Philippines breached its obligations under International law.

The Permanent Court of Arbitration dealt with the second of these arguments in a special jurisdictional hearing in October 2015, during which it found that the arbitral tribunal was the appropriate forum to settle the dispute.  The Court dealt with the matter of the status of the disputed features in its July 2016 Award.

The five judge panel found unanimously in favour of the Philippines on each of the four issues.

Source of Rights

The Court found that the “nine-dash line” was invalid under UNCLOS.  The Award stated that while China may once have had historic rights over the area, those rights were extinguished when China became a signatory to UNCLOS.  China therefore has no legal claim over the areas that fall within the economic exclusion zones provided for under the convention.

Status of Maritime Features

The Court found that under UNCLOS, maritime features that are above water at high tide generate an entitlement of 12 nautical miles and that islands generate a 200 nautical mile economic exclusion zone, but that “rocks which cannot sustain human habitation or economic life of their own shall have no exclusive economic zone”.

The Court stated that the test for determining whether the maritime feature could sustain economic life of its own was the objective capacity of the feature in its natural condition, independent of outside resources.

In relation to the Spratlys archipelago, the Court stated that while there was evidence of official Chinese personnel present on the island, this presence is dependent on outside support and is not reflective of the capacity of the features.  Accordingly, the Spratlys cannot generate an economic exclusion zone of their own, and instead the island falls within The Philippines’ economic exclusion zone.

Lawfulness of Chinese Actions

The Court found that China violated the Philippines’ legal rights in the area in four ways:

a)    By interfering with Philippines’ fishing in the area;

b)    Constructing artificial islands in the economic exclusion zone;

c)    Failing to prevent Chinese fishermen from fishing in the economic exclusion zone; and

d)    Causing irreparable harm to the marine environment.

Aggravation of Dispute

Finally, the Court found that since the Philippines initiated proceedings in 2013,  China had aggravated the dispute by increasing its military presence in the zone and refusing to engage in bilateral negotiations.

In the lead up to the Court’s decision China had gone to great lengths to reiterate its opposition to the proceedings and state that the arbitration is meaningless.  While the Award is legally binding, UNCLOS has no enforcement mechanism.  The best the Philippines can hope for, based on China’s track record, is that the decision paves the way for more fruitful bilateral negotiations or additional support from other nations such as the United States. 

China’s initial response to the decision has been quite hostile.  China maintains its position that the decision has no legal basis or international standing.  On 14 July 2016 China’s Foreign Ministry issued a blunt warning to Australia’s Foreign Minister that it is not in Australia’s economic interests to get involved in the South China dispute and if it did, there will be significant repercussions for Australia.

In the past China and Australia have been able to successfully separate the political and economic issues of interest; it remains to be seen whether this will be the exception.

Jackson McDonald and Globalaw

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