In the Matter of the South China Sea Arbitration

PCA Case No. 2013-19

July 12, 2016

FACTS:

On 22 January 2013, the Republic of the Philippines instituted arbitral proceedings

against the People’s Republic of China under Annex VII to the United Nations Convention on
the Law of the Sea (the “Convention”). The arbitration concerned the role of historic rights and
the source of maritime entitlements in the South China Sea, the status of certain maritime
features in the South China Sea, and the lawfulness of certain actions by China in the South
China Sea that the Philippines alleged to be in violation of the Convention.

While China and Philippines are both parties to the UNCLOS, China specifically made a
declaration in 2006 to exclude maritime boundary delimitation from its acceptance of
compulsory dispute settlement. In addition, China has shown disagreement with Philippines’
decision to take the matter to arbitration and has decided neither to agree with the decision of
the Tribunal nor to participate in the proceedings.

The Tribunal, on its end, has taken cognizance of these factors and has purported to not
deal with delimiting maritime boundaries. Furthermore, the Tribunal did not bar the proceedings,
on the basis of Article 9 of Annex VII of UNCLOS. In addition, the Tribunal also noted that
despite China’s absence from the proceedings, since it is a party to the UNCLOS, the decision
of the Tribunal would, in fact, be binding upon it, pursuant to Article 296 (1) and Article 11 of
Annex VII.

The Tribunal considered China’s Position Paper as a plea on jurisdiction, and conducted
a separate hearing on the issue of jurisdiction and admissibility. Additionally, the Tribunal also
declared that it would honour China’s declaration of 2006 and the UNCLOS and would neither
delve into issues of maritime boundary delimitation or questions of sovereignty. The Philippines
also stated that it, “does not seek in this arbitration a determination of which Party enjoys
sovereignty over the islands claimed by both of them. Nor does it request a delimitation of any
maritime boundaries.” Pursuant to this, the Tribunal issued its Award on Jurisdiction in October
2015, in which it concluded that it did indeed have jurisdiction in the case, as per Philippines’
Final Submissions, and that China’s lack of participation would not prove to be a bar to its
proceedings. It, further, concluded that the treaties China was relying on were either political in
nature and not legally binding, or that they did were legally binding and yet did not bar either
Party from alternative means of dispute resolution. In accordance with Article 283 of the
UNCLOS, the Tribunal found that this requirement was met in the diplomatic communications
between the Parties and that Philippines’ initiation of proceedings under the UNCLOS did not
constitute an abuse of process as claimed by China.

ISSUE/S:

1. To resolve a dispute between the parties regarding the source of maritime rights and
entitlements in the South China Sea;
2. To resolve a dispute between the parties concerning the entitlements to maritime zones
that would be generated under the Convention by Scarborough Shoal and certain
maritime features in the Spratly Islands that are claimed by both the parties;
 3. To resolve a series of disputes concerning the lawfulness of China’s actions in the South
China Sea, vis-à-vis interfering with Philippine’s rights, failing to protect and preserve the
marine environment, and inflicting harm on the marine environment (through land
reclamation and construction of artificial islands);
4. To find that China has aggravated and extended the disputes between the Parties by
restricting access to a detachment of Philippines Marines stationed at Second Thomas
Shoal.

DISCUSSION OF EACH ISSUE:

1. The broadest claim was a challenge to China’s “nine-dash line” covering most of the
South China Sea. China has never clarified whether the line represents a claim to the
islands within the line and their adjacent waters; a boundary of national sovereignty over
all the enclosed waters (including, but not limited by, the land features inside the line); or
a “historic” claim of sovereignty or some other set of historic rights to the maritime space
within the line. The Philippines sought a declaration that the countries’ respective rights
and obligations regarding the waters, seabed, and maritime features of the South China
Sea are governed by UNCLOS. As such, China’s claims based on any “historic rights” to
waters, seabed, and subsoil within the nine-dash line are contrary to UNCLOS and
invalid.

HELD: UNCLOS “comprehensively” governs the parties’ respective rights to maritime

areas in the South China Sea. Therefore, to the extent China’s nine- dash line is a claim
of “historic rights” to the waters of the South China Sea, it is invalid.

RATIONALE: Whatever historic rights China may have had were extinguished when
UNCLOS was adopted, to the extent those rights were incompatible with UNCLOS.

2. The Philippines sought a determination as to whether certain land features in the Spratly
Islands claimed by both China and the Philippines are properly characterized as islands,
rocks, low tide elevations (LTEs), or submerged banks. Under UNCLOS, an “island”
generates both a territorial sea of 12 nautical miles and an exclusive economic zone
(EEZ) of up to 200 nautical miles, subject to delimitation of a maritime boundary with any
other countries’ overlapping territorial seas or EEZs. A “rock” is entitled to a territorial
sea no greater than 12 nautical miles, but not an EEZ. LTEs and submerged banks do
not generate any such entitlements.

HELD: None of the features in the Spratly Islands generates an EEZ, nor can the Spratly
Islands generate an EEZ collectively as a unit. As such, the Tribunal declared certain
areas are within the Philippines’ EEZ and not overlapped by any possible Chinese
entitlement.

RATIONALE: The baseline of analysis is what the features can sustain in their “natural
condition” (i.e., not after construction of artificial islands, installation of desalination
plants, etc.). Based on historical evidence, none of the features in the Spratly Islands
can 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
personnel on the features is dependent on outside support and does not reflect the
capacity of the features in their natural condition.
3. The Philippines sought a declaration that China violated UNCLOS by interfering with the
Philippines’ rights and freedoms within its EEZs. This includes preventing Philippine
fishing around Scarborough Shoal, violating UNCLOS’s environmental protection
provisions through construction and fishing activities that have harmed the marine
environment (including at Scarborough Shoal, Second Thomas Shoal, and Mischief
Reef), and by dangerously operating law enforcement vessels around Scarborough
Shoal.

HELD: China violated the Philippines’ sovereign rights in its EEZ. It did so by interfering
with Philippine fishing and hydrocarbon exploration; constructing artificial islands; and
failing to prevent Chinese fishermen from fishing in the Philippines’ EEZ. China also
interfered with Philippine fishermen’s traditional fishing rights near Scarborough Shoal
(without prejudice to the question of sovereignty over Scarborough Shoal). China’s
construction of artificial islands at seven features in the Spratly Islands, as well as illegal
fishing and harvesting by Chinese nationals, violate UNCLOS obligations to protect the
marine environment. Finally, Chinese law enforcement vessels unlawfully created a
serious risk of collision by physically obstructing Philippine vessels at Scarborough
Shoal in 2012.

RATIONALE: This set of holdings depended on the Tribunal finding that certain areas
are within the Philippines’ EEZ and not subject to possible overlapping Chinese
entitlements. It also depended on finding that activities such as island construction are,
in accordance with China’s own public statements, not “military activities” and therefore
not excluded from jurisdiction under UNCLOS. Once this was established, the Tribunal
considered Chinese activities in the relevant areas and found that China had (a)
interfered with Philippine petroleum exploration at Reed Bank, (b) purported to prohibit
fishing by Philippine vessels within the Philippine EEZ, (c) protected and failed to
prevent Chinese fishermen from fishing within the Philippine EEZ at Mischief Reef and
Second Thomas Shoal, and (d) constructed artificial islands/installations at Mischief
Reef without the Philippines’ authorization. As for Scarborough Shoal, regardless of who
has sovereignty, both Philippine and Chinese fishermen have “traditional fishing rights”
at the Shoal that were not extinguished by UNCLOS, and China violated the Philippines’
rights by entirely preventing Filipino fishermen from fishing near Scarborough Shoal after
May 2012. In addition, Chinese artificial island construction has caused “severe harm to
the coral reef environment” and China has failed to stop its nationals from engaging in
“harmful” and “destructive” harvesting and fishing of endangered sea turtles, coral, and
giant clams in violation of UNCLOS. Finally, Chinese law enforcement vessels violated
maritime safety obligations by creating a serious risk of collision on two occasions in
April and May 2012 during the Scarborough Shoal standoff.

4. The Philippines sought a declaration that China’s recent actions, specifically its land
reclamation and construction of artificial islands in the Spratly Islands after the arbitration
was commenced, violated the obligations UNCLOS places on states to refrain from
conduct that “aggravates and extends” a dispute while dispute resolution proceedings
are pending.

HELD: China has aggravated and extended the disputes through its dredging, artificial
island-building, and construction activities.
RATIONALE: While these proceedings were pending, China has built a large island on
Mischief Reed, an LTE within the Philippines’ EEZ; caused irreparable harm to the
marine ecosystem; and permanently destroyed evidence of the natural condition of the
features at issue.