Lessons from the China vs. Philippines Arbitration Saga

On July 12, a United Nations arbitral tribunal in The Hague will pronounce verdict on a submission by The Philippines questioning the validity of China’s nine-dash line claims in the South China Sea (SCS). In the past few months, the case has been a staple of conversation among maritime analysts who have been riveted by its twists and turns. Not many, however, are betting on its outcome. The problem, as many complain, is that the issues involved are so steeped in maritime legalese that anyone attempting to unravel the complexities is immediately engulfed in a sea of technical arguments. And yet, it is critical to evaluate the implications of the tribunal’s decision, for it could lead to a potential reordering of the maritime balance in Asia.

The Philippines vs. China arbitration is outwardly a simple case of one state dragging another to court for unilaterally trying to press arbitrary claims by unlawful means. In January 2013, Manila filed proceedings under Annex VII of the United Nations Convention of the Law of the Sea (UNCLOS) to settle its outstanding dispute with China. A year earlier, Chinese behaviour in the SCS had turned plainly hostile with Chinese maritime and militia forces indulging in openly provocative manoeuvres in the seas surrounding the Scarborough reef – long claimed by The Philippines as an integral part of its territory. When The Philippines had had enough, it decided to take China to court.

Manila realised early on that it needed to be smart in invoking the provisions of the UNCLOS, which allows for compulsory arbitration but forbids the settling of territorial disputes. The Philippines’ legal team was therefore careful to dress-up its complaint in a way that it did not seem like a territorial dispute at all. At the heart of The Philippines’ submission lies questions about the legal validity of China’s “nine dashed line” in staking claims in the South China Sea. Manila framed its petition to seek a clarification from the court if state rights and obligations in the waters, seabed, and maritime features of the SCS could be demarcated by something as arbitrary as a hand-drawn line on a chart. Simply put, Manila asserted that China’s maritime map of the SCS was of dubious provenance, and claims arising from it were an outright violation of the law.

As is widely known, China’s legal position rests on the premise that the features it has occupied will eventually be granted the status of ‘islands’ under the UNCLOS, allowing Beijing to cement its claim over the entire South China Sea. Manila correctly understood China’s need for its occupied features to generate an exclusive economic zone (EEZ) and an entitlement to a continental shelf. The Philippines’ legal team therefore focused on getting the UN court to declare the small islands, atolls and shoals in the SCS as “rocks” or less, to ensure that they generate no more than 12 nautical miles of territorial sea, thereby puncturing Chinese claims.

Apart from determining the legal status of the features (islands, rocks, or low tide elevations), The Philippines also challenged China’s island reclamation activities by urging the court to reiterate the lawful position that land added to submerged and above-water line features cannot alter their basic legal status. This, again, was a complaint aimed at invalidating China’s massive reclamation activities in the South China Sea – a measure seen by many as a military tactic meant to shift the territorial status quo in the SCS by legitimatising China’s illegal occupation of features. Yet, Manila was cautious, and perhaps prudent, not to seek a direct indictment of China on the matter.

In the long run, it is The Philippines’ two other submissions that are potentially more likely to hurt Chinese domestic interests. Manila has questioned Beijing’s “historic rights” – including fishing rights – beyond the limits of its entitlements under the Convention. The Philippines also claims that China has violated the convention through its hazardous practices of harvesting of endangered species and destruction of coral reefs, including areas within The Philippines’ EEZ, irreversibly damaging the regional marine environment.

A Flawed Legal Strategy

If the Philippines’ legal tactics have drawn praise, China’s court-room handling of the situation has seemed needlessly rash, only serving to dent its own defence. Beijing’s first reaction was not to take cognizance of the matter at all – as if not acknowledging the case would effectively delegitimise it. That clearly did not work. Such was the high level of international interest in the affair that China was forced to come out with a position paper in December 2014 clarifying its official stance on the issue. Unfortunately for Beijing, its contention that Manila had violated the UNCLOS by filing a petition on a matter of territoriality was found to be devoid of merit.

But China’s legal strategy too has been dubious. In its arguments, Beijing made a number of errors of judgment that hurt its cause. First, China’s stand, that it was beyond the tribunal’s mandate to interpret the application of the convention, created the impression of a state that had not done its homework. Unimpressed by Beijing’s arguments at a hearing in July 2015, the judges pointed out that The Philippines’ claim related not to territorial sovereignty but physical geography of the South China Sea. Since Manila was only seeking a clarification on the legal status of disputed features in the SCS as islands, rocks or low tide elevations, the issue at stake was not their ownership, but the interpretation and application of UNCLOS’s Article 121(3) in determining the entitlement of territorial waters or EEZ, which seemed well within the court’s remit.

China’s second mistake was to link the case with its invocation of Article 298 in 2006, when Beijing voluntarily opted out of compulsory arbitration under the UNCLOS. This betrayed desperation on the part of Chinese lawyers to defend a seemingly indefensible position. By all accounts, China’s lawyers knew well that that the “opt-out” clause as detailed in Article 298 applies only to certain categories of disputes – those involving a disagreement over maritime boundaries (as described in Articles 15, 74 and 83) and on matters of military activity in EEZs. The Philippines’ submission concerned neither subset. Beijing’s argument that it was premature to resort to compulsory arbitration as “alternative mechanisms” had not been fully exhausted also appeared disingenuous. By all accounts, it was obvious that China’s maritime tactics in the SCS had left other claimants with little option but to initiate legal proceedings, which they are fully entitled to anyways, as individual parties under the law.

Beijing’s last gambit that proved counter-productive was the invocation of the Declaration of the Conduct of Parties (DOC) in criticising The Philippines’ submission. Beijing claimed it had an understanding with Manila under the DOC in the South China Sea to settle their disputes through bilateral negotiations. By unilaterally initiating the present arbitration, The Philippines had breached its obligation under international law.

A closer reading of the DOC, however, gives the lie to Chinese claims. The declaration simply states that the parties concerned undertake to resolve their territorial and jurisdictional disputes by peaceful means, without resorting to the threat or use of force, through friendly consultations and negotiations by sovereign states directly concerned, in accordance with universally recognised principles of international law, including the UNCLOS. Nowhere does the text impose any obligation on a state to eschew legal remedies. In any case, China’s “indisputable sovereignty” claims and its policy of not negotiating the sovereignty issue had left The Philippines with just one option: to settle the dispute through formal arbitration.

Now What?

As D-Day approaches, many anticipate a clear and categorical repudiation of China’s claims in the South China Sea. In purely legal terms, the Permanent Court of Arbitration’s decision will be binding, and a refusal to abide by its findings could have consequences. Beijing has, however, made it clear that in the event of a negative ruling it will simply ignore the judgment. What is more worrying is a warning by experts that a chastised China might consider leaving the UNCLOS. To ensure international support, Beijing has been rallying regional states for an endorsement of its legal position. A manic public relations campaign by its diplomats in recent weeks has resulted in some Asian and African states supporting China’s stand. On the whole, however, Beijing’s position looks decidedly shaky.

It is quite possible that Chinese leaders may have reconciled themselves to the possibility of an unfavourable ruling by the court. Ignoring the judgment and moving on may not, however, be easy. Not abiding by the court’s ruling would undermine China’s own position of being a responsible maritime state that is committed to maintaining a rules-based order. Concerns over reputation are, however, unlikely to trump core interests, which the Chinese political elite believe will be hit hard by a court ruling favouring Manila.

Ironically, “moving on” might be the best-case scenario for China’s opponents. Western analysts fear that an adverse decision by the tribunal could trigger a strong feeling of humiliation in Beijing, leading to retaliation in kind, by, say, setting up an ADIZ in the South China Sea, or accelerating the reclamation of Scarborough shoal, or even an attempt to deploy military forces in waters close to its occupied and reclaimed islands. That would further escalate tensions in the South China Sea. Perhaps anticipating such an outcome, Rodrigo Duterte, The Philippines’ President, has indicated that he is willing to “talk to” China after the ruling. Whether or not he decides to cut a deal with Beijing is moot. The harsh truth is that China has physical possession over many of the disputed features, and there is no regional mechanism in place to prevent the Chinese military from flexing its muscle.

There is some evidence to suggest that Xi Jinping is under some pressure to respond. The South China Sea cuts to the heart of Chinese sensitivities about its regional influence, and Beijing will not be pushed around on a matter that is central to its conception of state power. Still, there is a strong chance that worst-case predictions may not come true. There is gathering consensus that the tribunal will pass a mixed ruling – criticising Beijing’s stand in the SCS, but only partially rejecting its claims to historic rights. In the event of a 30/70 split ruling, or even a 40/60 one, Beijing will look to derive political mileage by “spinning” the concessions offered by the court to its advantage, and claim victory. This would be galling for The Philippines and other US allies. But it would at least avoid a slide into conflict. Either way, this is going to be a hard decision for the tribunal to make. The judges will be aware that it is a moment of truth for UNCLOS and the maritime system. Whatever happens on 12 of July could well determine the future of war and peace in Asia.

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.