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The South China Sea Dispute and the Philippines Arbitration Tribunal: China’s Policy Options

With a decision in the Philippines Arbitration Tribunal case expected any day, what are China’s policy options?

The long-standing South China Sea dispute between China and other maritime neighbouring states, particularly between China and the Philippines, is catching the world’s eye more than ever before by way of the interstate arbitration proceedings brought by the Philippines with respect to the dispute over “maritime entitlements” and the lawfulness of Chinese activities in the South China Sea.

China rejected the arbitration and returned the Philippines’ notification, and has consistently adhered to the position of non-acceptance of and non-participation in the arbitration. Despite this absence, an arbitral tribunal was established in June 2013. The tribunal’s requests for a response from China have been consistently ignored, resulting in bifurcation of the jurisdiction.

Since the Philippines’ initiation of the arbitration, the political and security tensions of the South China Sea have not been reduced, but have escalated into a potential flashpoint of conflict. One obvious example is that China has undertaken massive land reclamation activities on the disputed islands and reefs in the South China Sea.

Future policy options

On 29 October 2015, the Philippines Arbitration Tribunal rendered its award on jurisdiction and unanimously decided that it has jurisdiction to consider the Philippines’ Submissions No. 3, 4, 6, 7, 10, 11 and 13, respectively. This would logically force China to reconsider its non-participation policy because the tribunal’s decision will legally eliminate China’s obstacles to participation.

One option China could have taken would have been to take part in the next stage of the proceedings. This seems to imply that China would respect the tribunal’s positive decision on jurisdiction based on its full respect for “the right of the States Parties to the Convention to choose the means of dispute settlement of their own accord”, and could change its stance.

However, China rejected the tribunal’s award by declaring that it is null and void, and has no binding effect. This indicates that China would maintain its current policy of non-participation for the tribunal’s merits proceedings.

China’s continual non-participation might not be a wise option. First, China would lose the opportunity to defend itself once again. Moreover, China itself might be subject to much more criticism and significant political pressure from the international community. If China declined to implement an unfavourable ruling, not only would the South China Sea situation become more complicated than ever before, but China would also pay a heavy political price by being branded as an international outlaw and as a state that does not respect and comply with international law, gravely damaging its international reputation as a responsible actor in the international community and directly jeopardising its position as an adherent of international law.

It is important to consider that with its decision to have jurisdiction over some parts of the Philippines’ submissions, the Philippines Arbitration Tribunal resumed the merits proceedings. These would force China to reappraise its policy of non-participation. Obviously, “overt defiance of the Court by a great power over a case won by a small one may prove to be an unattractive example—a disincentive—for other states”, so re-engagement might be the right option for China. Such action can at least demonstrate to the world a cooperative posture for resolution, and would help to create a friendly atmosphere of interaction in order to encourage the Philippines to return to a cooperative mode for the settlement of their differences. The Philippines should make preparations of this kind because the first Annex VII arbitral award—the award for the Chagos Marine Protected Area Arbitration, adjudicating that an Annex VII tribunal has no jurisdiction over the sovereignty dispute over islands—will make the Philippines well aware that its challenge against China’s territorial claims in the South China Sea may not succeed.

Need for negotiation

If we consider past experience, it is unlikely that the tribunal will award the Philippines a clear “win”. Even if the Philippines receives a final award in its relative favour, this would not fundamentally resolve the core dispute. In several defaulting cases before the International Court of Justice, the judgment against the absent respondent states failed to settle the dispute. The tribunal’s decision to reserve some parts of the Philippines’ submissions for the merits phase might provide the Philippines with an incentive to rethink its arbitration tactics so as to seek an alternative means of settlement, such as negotiation. In fact, the tribunal’s decision of an independent jurisdictional proceeding could aid with introducing a “time-out” phase, serving to spur both parties into negotiating a settlement.

Particularly in the circumstance of the escalating tension endangering peace, stability and security in the South China Sea, the Philippines can only succeed in resolving the dispute on a win-win basis by negotiating with China. As Lauro Baja Junior, former UN representative for the Philippines, put it: “even if we win in the panel, we have to talk to China. If we lose, the more we have to talk to China”.

The future for the Sino-Philippine relationship

The settlement of the dispute by bilateral negotiation will be intensified by the newly positive signs emerging in relations between China and the Philippines. On November 9, 2015, the Chinese Ministry of Foreign Affairs announced that President Xi Jinping would attend the 23rd Asia-Pacific Economic Cooperation Leaders’ Meeting, which was hosted by the Philippines in 2015.

As their bilateral relationship continues to improve, the Philippines and China are likely to follow suit by jointly requesting the termination of the proceedings by a settled agreement. A focus on improving its bilateral relationship with the Philippines and participation in subsequent merits proceedings might be the right choice for China.

Mincai Yu is a professor of international law at the Renmin University of China. This article is adapted from his longer piece that recently appeared in the Australian Journal of International Affairs.

Published May 11, 2016