Brief Summary and Legal Analysis of the Final Award of the Permanent

Court of Arbitration in Republic of the Philippines vs. the People’s Republic

of China Arbitration Case No. 2013-19. July 12, 2016 in favor of the
Philippines under the United Nations Convention on the Law of the Sea
by
Dean Arturo M. de Castro
University of Manila
LI.M. 1976 S.J.D. 1982
University of Michigan School of Law

This is a brief summary and legal analysis of the final Award of the Permanent Court of
Arbitration (the Tribunal) in the Arbitration Case instituted by the Republic of the Philippines
against China under the United Nations Convention of the law of the Sea (UNCLOS) based on
the Press Release and the Award of the Tribunal issued on July 12, 2016

The South China Sea

The South China Sea is a semi-enclosed sea in the western Pacific Ocean, spanning an area of
almost 3.5 million square kilometers. The South China Sea lies to the south of China; to the
west of the Philippines; to the east of Viet Nam; and to the north of Malaysia, Brunei, Singapore,
and Indonesia. The South China Sea is a crucial shipping lane, a rich fishing ground, home to a
highly biodiverse coral reef ecosystem, and believed to hold substantial oil and gas resources.
The southern portion of the South China Sea is also the location of the Spratly Islands, a
constellation of small islands and coral reefs, existing just above or below water, that comprise
the peaks of undersea mountains rising from the deep ocean floor. Long known principally as a
hazard to navigation and identified on nautical charts as the “dangerous ground”, the Spratly
Islands are the site of longstanding territorial disputes among some of the littoral States
of the South China Sea. (Tribunal Award, P.1, Par.3)

The Features in the South China

Panatag shoal

Scarborough Shoal is known as “Huangyan Dao” (黄岩岛) in China and “Panatag Shoal” or “Bajo
de Masinloc” in the Philippines and is a coral reef located at 15° 09′ 16″ N, 117° 45′ 58″ E. Scarborough
Shoal is 116.2 nautical miles from the archipelagic baseline of the Philippine island of Luzon and 448.2
nautical miles from China’s baseline point 29 (Jiapengliedao) near Hong Kong.263. (Tribunal Award,
P.120)

Cuarteron Reef

Cuarteron Reef is known as “Huayang Jiao” (华阳礁) in China and “Calderon Reef” in the
Philippines. It is a coral reef located at 08° 51′ 41″ N, 112° 50′ 08″ E and is the easternmost of four
maritime features known collectively as the London Reefs that are located on the western edge of the
Spratly Islands. Cuarteron Reef is 245.3 nautical miles from the archipelagic baseline of the Philippine
island of Palawan and 585.3 nautical miles from China’s baseline point 39 (Dongzhou (2)) adjacent to the
island of Hainan. (Ibid, P.285)

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 Fiery Cross Reef

Fiery Cross Reef is known as “Yongshu Jiao” (永暑礁) in China and “Kagitingan Reef” in the
Philippines. It is a coral reef located at 09° 33′ 00″ N, 112° 53′ 25″ E, to the north of Cuarteron Reef and
along the western edge of the Spratly Islands, adjacent to the main shipping routes through the South
China Sea. Fiery Cross Reef is 254.2 nautical miles from the archipelagic baseline of the Philippine island
of Palawan and 547.7 nautical miles from the China’s baseline point 39 (Dongzhou (2)) adjacent to the
island of Hainan. (Ibid, P.286)

Union Bank (Center of Spratly Island)

Johnson Reef, McKennan Reef, and Hughes Reef are all coral reefs that form part of the
larger reef formation in the centre of the Spratly Islands known as Union Bank. Union Bank also
includes the high-tide feature of Sin Cowe Island. Johnson Reef (also known as Johnson South
Reef) is known as “Chigua Jiao” (赤瓜礁) in China and “Mabini Reef” in the Philippines. It is
located at 9° 43′ 00″ N, 114° 16′ 55″ E and is 184.7 nautical miles from the archipelagic
baseline of the Philippine island of Palawan and 570.8 nautical miles from China’s baseline
point 39 (Dongzhou (2)) adjacent to Hainan. Although the Philippines has referred to
“McKennan Reef (including Hughes Reef)” in its Submissions, the Tribunal notes that McKennan
Reef and Hughes Reef are distinct features, albeit adjacent to one another, and considers it
preferable, for the sake of clarity, to address them separately. McKennan Reef is known as
“Ximen Jiao” (西门礁) in China and, with Hughes Reef, is known collectively as “Chigua Reef” in
the Philippines. It is located at 09° 54′ 13″ N, 114° 27′ 53″ E and is 181.3 nautical miles from
the archipelagic baseline of the Philippine island of Palawan and 566.8 nautical miles from
China’s baseline point 39 (Dongzhou (2)) adjacent to Hainan. Hughes Reef is known as
“Dongmen Jiao” (东门礁) in China and, with McKennan Reef, is known collectively as “Chigua
Reef” in the Philippines. It is located at 09° 54′ 48″ N 114°29′ 48″ E and is 180.3 nautical miles
from the archipelagic baseline of the Philippine island of Palawan and 567.2 nautical miles from
China’s baseline point 39 (Dongzhou (2)) adjacent to Hainan. (Tribunal Award, p.287)

Gaven Reef

The Gaven Reefs are known as “Nanxun Jiao” (南薰礁) in China and “Burgos” in the
Philippines. They constitute a pair of coral reefs that forms part of the larger reef formation
known as Tizard Bank, located directly to the north of Union Bank. Tizard Bank also includes the
high-tide features of Itu Aba Island, Namyit Island, and Sand Cay. Gaven Reef (North) is located
at 10° 12′ 27″ N, 114° 13′ 21″ E and is 203.0 nautical miles from the archipelagic baseline of
the Philippine island of Palawan and 544.1 nautical miles from China’s baseline point 39
(Dongzhou (2)) adjacent to Hainan. Gaven Reef (South) is located at 10° 09′ 42″ N 114° 15′ 09″
E and is 200.5 nautical miles from the archipelagic baseline of the Philippine island of Palawan
and 547.4 nautical miles from China’s baseline point 39 (Dongzhou (2)) adjacent to Hainan. (Ibid,
P.288)

Subi Reef

Subi Reef is known as “Zhubi Jiao” (渚碧礁) in China and “Zamora Reef” in the
Philippines. It is a coral reef located to the north of Tizard Bank and a short distance to the
south-west of the high-tide feature of Thitu Island and its surrounding Thitu Reefs. Subi Reef is
located at 10° 55′ 22″ N, 114° 05′ 04″ E and lies on the north-western edge of the Spratly
Islands. Subi Reef is 231.9 nautical miles from the archipelagic baseline of the Philippine island
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of Palawan and 502.2 nautical miles from China’s baseline point 39 (Dongzhou (2)) adjacent to
Hainan (Tribunal Award, P.289)

Mischief Reef (Panganiban Reef) and Second Thomas Shoal (Ayungin

Shoal)

Mischief Reef and Second Thomas Shoal are both coral reefs located in the centre of the
Spratly Islands, to the east of Union Bank and to the south-east of Tizard Bank. Mischief Reef is
known as “Meiji Jiao” (美济礁) in China and “Panganiban” in the Philippines. It is located at 09°
54′ 17″ N, 115° 31′ 59″ E and is 125.4 nautical miles from the archipelagic baseline of the
Philippine island of Palawan and 598.1 nautical miles from China’s baseline point 39 (Dongzhou
(2)) adjacent to Hainan. Second Thomas Shoal is known as “Ren’ai Jiao” (仁爱礁) in China and
“Ayungin Shoal” in the Philippines. It is located at 09° 54′ 17″ N, 115° 51′ 49″ E and is 104.0
nautical miles from the archipelagic baseline of the Philippine island of Palawan and 616.2
nautical miles from China’s baseline point 39 (Dongzhou (2)) adjacent to Hainan. (Ibid, P.290)

Summary of Rulings
Features that are above water at high tide generate an entitlement to at least 12
nautical miles territorial sea, whereas features that are submerged at high tide do not.
Under the Convention, islands generate an exclusive economic zone of 200 Nautical miles and a
Continental shelf, but rocks which cannot sustain human habitation or economic life of their
own have no exclusive economic zone or continental shelf. To be entitled to EEZ and
continental shelf, the Island must have the objective capacity of a feature, in its natural
condition, before any reclamation and construction, to sustain either a stable community of
people or economic activity that is not dependent on outside resources or purely extractive in
nature.

The current presence of official personnel on many of the features is dependent on

outside support and not reflective of the capacity of the features. The Tribunal found historical
evidence to be more relevant and noted that the Spratly Islands were historically used by small
groups of fishermen and that several Japanese fishing and guano mining enterprises were
attempted. The Tribunal concluded that such transient use does not constitute inhabitation by
a stable community and that all of the historical economic activity had been extractive.
Accordingly, the Tribunal concluded that none of the Spratly Islands is capable of generating
extended maritime zones. The Tribunal also held that the Spratly Islands cannot generate
maritime zones collectively as a unit. Having found that none of the features claimed by China
was capable of generating an exclusive economic zone, the Tribunal found that it could—
without delimiting a boundary—declare that certain sea areas are within the exclusive
economic zone of the Philippines, because those areas are not overlapped by any possible
entitlement of China. (Press Release, P.2)

Application of the Rulings

Senior Supreme Court Justice Antonio Carpio has the following good commentaries on
the Award of the Permanent Court of Arbitration.

1. The High Seas in the South

China Sea_____________

There is a huge area, the high seas constituting some 25 percent of the South
China Sea that seperates China’s EEZ from the Spratlys and Panatag Shoal.

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 The high seas beyond any national jurisdiction are part of the global commons and
belong to all mankind.

The other coastal states, Malaysia, Brunei, Indonesia and Vietnam have their own 370-
km EEZs unencumbered by any Chinese claim from the nine-dash line.

2. Exclusive Sovereign rights of the Philippines

To its EEZs.___________________________
For the Philippines, the ruling means its entire EEZ in the South China Sea is free
from any Chinese claim except for the 22.2-km territorial seas of three high-tide rocks
controlled by China, Mabini Reef (Johnson South Reef) and Mckenan Reef (Hughes Reef)
in the Spratlys, and Panatag Shoal off Zambales province on the western coast of Luzon.

The Philippine EEZ in the South China Sea has an area of 381,000 square
kilometers. Deducting the 4,650 sq km total territorial seas of Mabini Reef, Mckennan
Reef and Panatag Shoal, the Philippines has an EEZ of 376,350 sq km in the South China
Sea free from any Chinese claim.

This maritime area is larger than the total land area of the Philippines of 300,000
sq km All the living and nonliving resources in this maritime area, the fish, oil, gas and
other minerals belong exclusively to the Philippines. (Carpio Antonio, “The Hague
Tribunal; Ramifications of Ruling.” Manila Bulletin, Pp 1 and 16, July 21, 2016)

Legal Status of the Features in the

South China Sea
In its Award of 12 July 2016, the Tribunal considered the status of features in the South
China Sea and the entitlements to maritime areas that China could potentially claim pursuant to
the Convention.

The Tribunal first undertook a technical evaluation as to whether certain coral reefs
claimed by China are or are not above water at high tide. Under Articles 13 and 121 of the
Convention, features that are above water at high tide generate an entitlement to at least a 12
nautical mile territorial sea, whereas features that are submerged at high tide generate no
entitlement to maritime zones. The Tribunal noted that many of the reefs in the South China
Sea have been heavily modified by recent land reclamation and construction and recalled that
the Convention classifies features on the basis of their natural condition. The Tribunal
appointed an expert hydrographer to assist it in evaluating the Philippines’ technical evidence
and relied heavily on archival materials and historical hydrographic surveys in evaluating the
features. The Tribunal agreed with the Philippines that Scarborough Shoal, Johnson Reef,
Cuarteron Reef, and Fiery Cross Reef are high-tide features and that Subi Reef, Hughes Reef,
Mischief Reef, and Second Thomas Shoal were submerged at high tide in their natural condition.
However, the Tribunal disagreed with the Philippines regarding the status of Gaven Reef
(North) and McKennan Reef and concluded that both are high tide features.

The Tribunal then considered whether any of the features claimed by China could
generate an entitlement to maritime zones beyond 12 nautical miles. Under Article 121 of the
Convention, islands generate an entitlement to an exclusive economic zone of 200 nautical
miles and to a continental shelf, but “[r]ocks which cannot sustain human habitation or
economic life of their own shall have no exclusive economic zone or continental shelf.” The
Tribunal noted that this provision was closely linked to the expansion of coastal State
jurisdiction with the creation of the exclusive economic zone and was intended to prevent
insignificant features from generating large entitlements to maritime zones that would infringe

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on the entitlements of inhabited territory or on the high seas and the area of the seabed
reserved for the common heritage of mankind. The Tribunal interpreted Article 121 and
concluded that the entitlements of a feature depend on (a) the objective capacity of a feature,
(b) in its natural condition, to sustain either (c) a stable community of people or (d) economic
activity that is neither dependent on outside resources nor purely extractive in nature.

The Tribunal noted that many of the features in the Spratly Islands are currently
controlled by one or another of the littoral States, which have constructed installations and
maintain personnel there. The Tribunal considered these modern presences to be dependent
on outside resources and support and noted that many of 10 the features have been modified
to improve their habitability, including through land reclamation and the construction of
infrastructure such as desalination plants. The Tribunal concluded that the current presence of
official personnel on many of the features does not establish their capacity, in their natural
condition, to sustain a stable community of people and considered that historical evidence of
habitation or economic life was more relevant to the objective capacity of the features.
Examining the historical record, the Tribunal noted that the Spratly Islands were historically
used by small groups of fishermen from China, as well as other States, and that several
Japanese fishing and guano mining enterprises were attempted in the 1920s and 1930s. The
Tribunal concluded that temporary use of the features by fishermen did not amount to
inhabitation by a stable community and that all of the historical economic activity had been
extractive in nature. Accordingly, the Tribunal concluded that all of the high-tide features in the
Spratly Islands (including, for example, Itu Aba, Thitu, West York Island, Spratly Island, North-
East Cay, South-West Cay) are legally “rocks” that do not generate an exclusive economic zone
or continental shelf.

The Tribunal also held that the Convention does not provide for a group of islands such
as the Spratly Islands to generate maritime zones collectively as a unit. (Press Release, Pp. 9-10)

China’s Activities in the South

China Sea in violation of the UNCLOS
In its Award of 12 July 2016, the Tribunal considered the lawfulness under the
Convention of various Chinese actions in the South China Sea.

Having found that Mischief Reef, Second Thomas Shoal and Reed Bank are submerged
at high tide, form part of the exclusive economic zone and continental shelf of the Philippines,
and are not overlapped by any possible entitlement of China, the Tribunal concluded that the
Convention is clear in allocating sovereign rights to the Philippines with respect to sea areas in
its exclusive economic zone. The Tribunal found as a matter of fact that China had (a) interfered
with Philippine petroleum exploration at Reed Bank, (b) purported to prohibit fishing by
Philippine vessels within the Philippines’ exclusive economic zone, (c) protected and failed to
prevent Chinese fishermen from fishing within the Philippines’ exclusive economic zone at
Mischief Reef and Second Thomas Shoal, and (d) constructed installations and artificial islands
at Mischief Reef without the authorization of the Philippines. The Tribunal therefore concluded
that China had violated the Philippines’ sovereign rights with respect to its exclusive economic
zone and continental shelf.

The Tribunal next examined traditional fishing at Scarborough Shoal and concluded that
fishermen from the Philippines, as well as fishermen from China and other countries, had long
fished at the Shoal and had traditional fishing rights in the area. Because Scarborough Shoal is
above water at high tide, it generates an entitlement to a territorial sea, its surrounding waters
do not form part of the exclusive economic zone, and traditional fishing rights were not
extinguished by the Convention. Although the Tribunal emphasized that it was not deciding
sovereignty over Scarborough Shoal, it found that China had violated its duty to respect to the

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traditional fishing rights of Philippine fishermen by halting access to the Shoal after May 2012.
The Tribunal noted, however, that it would reach the same conclusion with respect to the
traditional fishing rights of Chinese fishermen if the Philippines were to prevent fishing by
Chinese nationals at Scarborough Shoal.

The Tribunal also considered the effect of China’s actions on the marine environment. In
doing so, the Tribunal was assisted by three independent experts on coral reef biology who
were appointed to assist it in evaluating the available scientific evidence and the Philippines’
expert reports. The Tribunal found that China’s recent large scale land reclamation and
construction of artificial islands at seven features in the Spratly Islands has caused severe harm
to the coral reef environment and that China has violated its obligation under Articles 192 and
194 of the Convention to preserve and protect the marine environment with respect to fragile
ecosystems and the habitat of depleted, threatened, or endangered species. The Tribunal also
found that Chinese fishermen have engaged in the harvesting of endangered sea turtles, coral,
and giant clams on a substantial scale in the South China Sea, using methods that inflict severe
damage on the coral reef environment. The Tribunal found that Chinese authorities were aware
of these activities and failed to fulfill their due diligence obligations under the Convention to
stop them.

Finally, the Tribunal considered the lawfulness of the conduct of Chinese law
enforcement vessels at Scarborough Shoal on two occasions in April and May 2012 when
Chinese vessels had sought to physically obstruct Philippine vessels from approaching or
gaining entrance to the Shoal. In doing so, the Tribunal was assisted by an independent expert
on navigational safety who was appointed to assist it in reviewing the written reports provided
by the officers of the Philippine vessels and the expert evidence on navigational safety provided
by the Philippines. The Tribunal found that Chinese law enforcement vessels had repeatedly
approached the Philippine vessels at high speed and sought to cross ahead of them at close
distances, creating serious risk of collision and danger to Philippine ships and personnel. The
Tribunal concluded that China had breached its obligations under the Convention on the
International Regulations for Preventing Collisions at Sea, 1972, and Article 94 the Convention
concerning maritime safety. (Ibid, Pp 10-11)

Jurisdiction
Issues of Territorial sovereignty, territorial delimitation and military activities are
outside the jurisdiction of the Permanent Court of Arbitration which dealt only with the issues
of maritime entitlements and sovereign rights of states over their Exclusive Economic Zones
under the UNCLOS, which is a multilateral treaty that abrogates historic rights and other
maritime claims inconsistent therewith on maritime entitlements and maritime sovereign rights.

Vietnam, Indonesia, Malaysia, Taiwan and Singapore are not indispensable parties to
the arbitration case although some of the features may fall under their exclusive economic zone
and they may stand to benefit or suffer from the outcome of the case by way of stare decises or
precedent but being non-parties to the case, they are not bound by the Award. The issues
raised are limited only to the questions of maritime entitlements and sovereign rights to the
EZZ of the Philippines vis-a-viz the claims of China under the UNCLOS.

At any rate, said countries did not object to the arbitration, and even attended all the
hearings and were furnished with all the pleadings and resolutions as official observers in the
arbitration proceedings. They have no reason to object to the rulings that are ultimately
favorable to them under the UNCLOS.

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 Conduct of the Parties
under the Arbitral Award
While the Arbitral Award is binding on China. China does not recognize the Award and
prohibits Filipino fisher folks from fishing within Philippine Exclusive Economic Zone in the
Mischief Reef (Panganiban Reef), Second Thomas Shoal (Ayungin Shoal), Scarborough Shoal
(Bajo de Masinloc).

The Philippines renounces war as an instrument of national policy, which any way it
cannot win alone against the military might of China. The options are to negotiate with China or
file cases in the proper courts to enforce its rights and redress it grievances and claim for
damages under the UNCLOS.

The Duterte Administration has opted for bilateral negotiations between the Philippines
and China, which had indicated in the past willingness for this mode of exploring possible
amicable settlement. The previous Administration insisted on multi-lateral negotiations with
other Asian countries which have respective claims in the South China. The Philippines thru the
previous administration did not accept bilateral negotiations with China and instead initiated
the arbitration case against China.

Legally Viable Solution

The legally viable solution is provided under the United Nations Law of the Sea (UNCLOS) which
by necessary implication, allows building installations and artificial islands within the Exclusive Economic
Zone (EEZ) of the Philippines, by another party with the authorization of the Philippines. The curative
authorization that may be granted by the Philippines would legalize the construction of artificial islands
and installations by China on the Mischief Reef within the Philippine Exclusive Economic Zone (EEZ)
without the authorization of the Philippines.

An amicable solution calls for the observance and respect by China of the UNCLOS. The
Petroleum Exploration at Reed Bank should proceed on mutually acceptable terms between the
Philippines and China, who should also respect the fishing rights of Filipinos within the Philippines’
Exclusive Economic Zone (EEZ) at the Mischief Reef and Second Thomas Shoal as mandated by the
UNCLOS and the Arbitral Award.

The authority of the President Rodrigo Duterte to negotiate and conclude a bilateral agreement
with China is provided by the Section 2, Article XII of the 1987 Constitution on the exploitation,
development and utilization of natural resources of the Philippines, which reads as follows:

SECTION 2. All lands of the public domain, waters, minerals, coal,

petroleum, and other mineral oils, all forces of potential energy, fisheries,
forests or timber, wildlife, flora and fauna, and other natural resources are
owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and utilization
of natural resources shall be under the full control and supervision of the State.
The State may directly undertake such activities, or it may enter into co-
production, joint venture, or production-sharing agreements with Filipino
citizens, or corporations or associations at least sixty per centum of whose
capital is owned by such citizens. Such agreements may be for a period not
exceeding twenty-five years, renewable for not more than twenty-five years,
and under such terms and conditions as may be provided by law. In cases of
water rights for irrigation, water supply, fisheries, or industrial uses other than
the development of water power, beneficial use may be the measure and
limit of the grant.

The State shall protect the nation’s marine wealth in its

archipelagic waters, territorial sea, and exclusive economic zone, and
reserve its use and enjoyment exclusively to Filipino citizens.
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 The Congress may, by law, allow small-scale utilization of natural
resources by Filipino citizens, as well as cooperative fish farming, with
priority to subsistence fishermen and fishworkers in rivers, lakes, bays,
and lagoons.

The President may enter into agreements with foreign-owned

corporations involving either technical or financial assistance for large-
scale exploration, development, and utilization of minerals, petroleum,
and other mineral oils according to the general terms and conditions
provided by law, based on real contributions to the economic growth
and general welfare of the country. In such agreements, the State shall
promote the development and use of local scientific and technical
resources.

The President shall notify the Congress of every contract entered

into in accordance with this provision, within thirty days from its
execution.

Natural resources within the Philippines’ Exclusive Economic Zone (EEZ) may be
explored, developed and utilized under a co-production, joint venture, or production sharing
agreements with a foreign corporation at least 60% of the capital which, both common voting
shares and preferred shares are owned by Philippine Nationals. These co-production, joint
venture, or production sharing agreements may be entered by the President of the Philippines
alone. The President, according to the general terms and conditions provided by law, based on
real contributions to the economic growth and general welfare of the Country, may enter into
agreements with 100% foreign owned corporations involving either technical or financial
assistance for the largescale exploration, development, and utilization of minerals, petroleum
and other mineral oils.

The policy statement in the Constitution to reserve the use and enjoyment of the
Exclusive Economic Zone (EEZ) to Filipino citizens is a non-executing policy statement and
should not be a hindrance to the highly political act of the President to negotiate and conclude
a pacific settlement of the dispute with China involving foreign relations, in the conduct of
which the President is responsible only to the people under the Political Question Doctrine.

The people support the initiatives of President Duterte to pursue independent foreign
economic and trade policies with all the nations of the World and bilateral negotiations with
China on the West Philippine Sea inorder to serve the best interest of the Filipino people.

Nota Bene: Dean Arturo M. de Castro is currently the Dean of the College of Criminology
and Associate Dean of the College of Law and Bar Review Director of the University of Manila.
He belongs to the private academic sector who supports the programs of the Duterte
Administration on the Anti-Drugs Campaign and independent foreign policies and the
promotion of amity, friendship and economic cooperation with all the nations of the World to
serve the best interest of the Filipino people.

Despite the humility of the President, he is a natural hardworking wise genius leading
the country to peace and prosperity despite the great odds alonalong the way, with the popular
support of the Filipino people.

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