#CHexit: PH wins arbitration case vs China over South China Sea (full text)

The verdict of the Permanent Court of Arbitration in The Hague, Netherlands, over the South China Sea favors the Philippines against China.

In its ruling, the PCA said there is no legal basis for China's 9-dash line claim.

"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,," the Tribunal said.

China violated Philippine sovereign rights, the international court said.

"Having found that certain areas are within the exclusive economic zone of the Philippines, the Tribunal found that China had violated the Philippines’ sovereign rights in its exclusive economic zone by (a) interfering with Philippine fishing and petroleum exploration, (b) constructing artificial islands and (c) failing to prevent Chinese fishermen from fishing in the zone."

"The Tribunal further held that Chinese law enforcement vessels had unlawfully created a serious risk of collision when they physically obstructed Philippine vessels," it added.

Here's the full text of the decision:

"PRESS RELEASE
THE SOUTH CHINA SEA ARBITRATION
(THE REPUBLIC OF THE PHILIPPINES V . THE PEOPLE’ S REPUBLIC OF CHINA )
The Hague, 12 July 2016

The Tribunal Renders Its Award

A unanimous Award has been issued today by the Tribunal constituted under Annex VII to the UnitedNations Convention on the Law of the Sea (the “Convention”) in the arbitration instituted by the Republic of the Philippines against the People’s Republic of China.

This arbitration concerned the role of historic rights and the source of maritime entitlements in the South China Sea, the status of certain maritime features and the maritime entitlements they are capable of generating, and the lawfulness of certain actions by China that were alleged by the Philippines to violate the Convention. In light of limitations on compulsory dispute settlement under the Convention, the Tribunal has emphasized that it does not rule on any question of sovereignty over land territory and does not delimit any boundary between the Parties.

China has repeatedly stated that “it will neither accept nor participate in the arbitration unilaterally initiated by the Philippines.” Annex VII, however, provides that the “[a]bsence of a party or failure of a party to defend its case shall not constitute a bar to the proceedings.” Annex VII also provides that, in the event that a party does not participate in the proceedings, a tribunal “must satisfy itself not only that it has jurisdiction over the dispute but also that the claim is well founded in fact and law.” Accordingly, throughout these proceedings, the Tribunal has taken steps to test the accuracy of the Philippines’ claims, including by requesting further written submissions from the Philippines, by questioning the Philippines both prior to and during two hearings, by appointing independent experts to report to the Tribunal on technical matters, and by obtaining historical evidence concerning features in the South China Sea and providing it to the Parties for comment.

China has also made clear—through the publication of a Position Paper in December 2014 and in other official statements—that, in its view, the Tribunal lacks jurisdiction in this matter. Article 288 of the Convention provides that: “In the event of a dispute as to whether a court or tribunal has jurisdiction, the matter shall be settled by decision of that court or tribunal.” Accordingly, the Tribunal convened a hearing on jurisdiction and admissibility in July 2015 and rendered an Award on Jurisdiction and Admissibility on 29 October 2015, deciding some issues of jurisdiction and deferring others for further consideration. The Tribunal then convened a hearing on the merits from 24 to 30 November 2015.

The Award of today’s date addresses the issues of jurisdiction not decided in the Award on Jurisdiction and Admissibility and the merits of the Philippines’ claims over which the Tribunal has jurisdiction. The Award is final and binding, as set out in Article 296 of the Convention and Article 11 of Annex VII.

Historic Rights and the ‘Nine-Dash Line’: The Tribunal found that it has jurisdiction to consider the Parties’ dispute concerning historic rights and the source of maritime entitlements in the South China Sea. On the merits, the Tribunal concluded that the Convention comprehensively allocates rights to maritime areas and that protections for pre-existing rights to resources were considered, but not adopted in the Convention. Accordingly, the Tribunal concluded that, to the extent China had historic rights to resources in the waters of the South China Sea, such rights were extinguished to the extent they were incompatible with the exclusive economic zones provided for in the Convention. The Tribunal also noted that, although Chinese navigators and fishermen, as well as those of other States, had historically made use of the islands in the South China Sea, there was no evidence that China had historically exercised exclusive control over the waters or their resources. The Tribunal concluded that there was no legal basis for China to claim historic rights to resources within the sea areas falling within the ‘nine-dash line’.

Status of Features: The Tribunal next considered entitlements to maritime areas and the status of features. The Tribunal first undertook an evaluation of whether certain reefs claimed by China are above water at high tide. 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 do not. The Tribunal noted that the reefs have been heavily modified by land reclamation and construction, recalled that the Convention classifies features on their natural condition, and relied on historical materials in evaluating the features. The Tribunal then considered whether any of the features claimed by China could generate maritime zones beyond 12 nautical miles. Under the Convention, islands generate an exclusive economic zone of 200 nautical miles and 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 concluded that this provision depends upon the objective capacity of a feature, in its natural condition, to sustain either a stable community of people or economic activity that is not dependent on outside resources or purely extractive in nature. The Tribunal noted that 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.

Lawfulness of Chinese Actions: The Tribunal next considered the lawfulness of Chinese actions in the
South China Sea. Having found that certain areas are within the exclusive economic zone of the Philippines, the Tribunal found that China had violated the Philippines’ sovereign rights in its exclusive economic zone by (a) interfering with Philippine fishing and petroleum exploration, (b) constructing artificial islands and (c) failing to prevent Chinese fishermen from fishing in the zone. The Tribunal also held that fishermen from the Philippines (like those from China) had traditional fishing rights at Scarborough Shoal and that China had interfered with these rights in restricting access. The Tribunal further held that Chinese law enforcement vessels had unlawfully created a serious risk of collision when they physically obstructed Philippine vessels.

Harm to Marine Environment: The Tribunal considered the effect on the marine environment of China’s recent large-scale land reclamation and construction of artificial islands at seven features in the Spratly Islands and found that China had caused severe harm to the coral reef environment and violated its obligation to preserve and protect fragile ecosystems and the habitat of depleted, threatened, or endangered species. The Tribunal also found that Chinese authorities were aware that Chinese fishermen have harvested 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) and had not fulfilled their obligations to stop such activities.

Aggravation of Dispute: Finally, the Tribunal considered whether China’s actions since the commencement of the arbitration had aggravated the dispute between the Parties. The Tribunal found that it lacked jurisdiction to consider the implications of a stand-off between Philippine marines and Chinese naval and law enforcement vessels at Second Thomas Shoal, holding that this dispute involved military activities and was therefore excluded from compulsory settlement. The Tribunal found, however, that China’s recent large-scale land reclamation and construction of artificial islands was incompatible with the obligations on a State during dispute resolution proceedings, insofar as China has inflicted irreparable harm to the marine environment, built a large artificial island in the Philippines’ exclusive economic zone, and destroyed evidence of the natural condition of features in the South China Sea that formed part of the Parties’ dispute.

An expanded summary of the Tribunal’s decisions is set out below.

The Tribunal was constituted on 21 June 2013 pursuant to the procedure set out in Annex VII of the Convention to decide the dispute presented by the Philippines. The Tribunal is composed of Judge Thomas A. Mensah of Ghana, Judge Jean-Pierre Cot of France, Judge Stanislaw Pawlak of Poland, Professor Alfred H.A. Soons of the Netherlands, and Judge Rüdiger Wolfrum of Germany. Judge Thomas A. Mensah serves as President of the Tribunal. The Permanent Court of Arbitration acts as the Registry in the proceedings.

Further information about the case may be found at www.pcacases.com/web/view/7, including the Award on Jurisdiction and Admissibility, the Rules of Procedure, earlier Press Releases, hearing transcripts, and photographs. Procedural Orders, submissions by the Philippines, and reports by the Tribunal’s experts will be made available in due course, as will unofficial Chinese translations of the Tribunal’s Awards.

Background to the Permanent Court of Arbitration

The Permanent Court of Arbitration (PCA) is an intergovernmental organization established by the 1899 Hague Convention on the Pacific Settlement of International Disputes. The PCA has 121 Member States. Headquartered at the Peace Palace in The Hague, the Netherlands, the PCA facilitates arbitration, conciliation, fact-finding, and other dispute resolution proceedings among various combinations of States, State entities, intergovernmental organizations, and private parties. The PCA’s International Bureau is currently administering 8 interstate disputes, 73 investor-State arbitrations, and 34 cases arising under contracts involving a State or other public entity. The PCA has administered 12 cases initiated by States under Annex VII to the United Nations Convention on the Law of the Sea.

In July 2013, the Tribunal in the South China Sea Arbitration appointed the PCA to serve as Registry for the proceedings. The Tribunal’s Rules of Procedure provide that the PCA shall “maintain an archive of the arbitral proceedings and provide appropriate registry services as directed by the Arbitral Tribunal.” Such services include assisting with the identification and appointment of experts; publishing information about the arbitration and issuing press releases; organizing the hearings at the Peace Palace in The Hague; and the financial management of the case, which involves holding a deposit for expenses in the arbitration, such as to pay arbitrator fees, experts, technical support, court reporters etc. The Registry also serves as the channel of communications amongst the Parties and the Tribunal and observer States.

Photograph: Hearing in session, July 2015, Peace Palace, The Hague. Clockwise from top left: Registrar and PCA Senior Legal Counsel Judith Levine; Judge Stanislaw Pawlak; Professor Alfred H. A. Soons; Judge Thomas A. Mensah (Presiding Arbitrator); Judge Jean-Pierre Cot; Judge Rüdiger Wolfrum; PCA Senior Legal Counsel Garth Schofield; former Secretary for Foreign Affairs of the Philippines, Mr. Albert F. Del Rosario; former Solicitor General Mr. Florin T. Hilbay, Counsel for the Philippines; Mr. Paul S. Reichler; Professor Philippe Sands; Professor Bernard H. Oxman; Professor Alan E. Boyle; Mr. Lawrence H. Martin.

SUMMARY OF THE TRIBUNAL’S DECISIONS ON ITS JURISDICTION AND ON THE MERITS OF THE PHILIPPINES ’ CLAIMS

1. Background to the Arbitration
The South China Sea Arbitration between the Philippines and China concerned an application by the Philippines for rulings in respect of four matters concerning the relationship between the Philippines and China in the South China Sea. First, the Philippines sought a ruling on the source of the Parties’ rights and obligations in the South China Sea and the effect of the United Nations Convention on the Law of the Sea (“Convention”) on China’s claims to historic rights within its so-called ‘nine-dash line’. Second, the Philippines sought a ruling on whether certain maritime features claimed by both China and the Philippines are properly characterized as islands, rocks, low-tide elevations or submerged banks under the Convention. The status of these features under the Convention determines the maritime zones they are capable of generating. Third, the Philippines sought rulings on whether certain Chinese actions in the South China Sea have violated the Convention, by interfering with the exercise of the Philippines’ sovereign rights and freedoms under the Convention or through construction and fishing activities that have harmed the marine environment. Finally, the Philippines sought a ruling that certain actions taken by China, in particular its large-scale land reclamation and construction of artificial islands in the Spratly Islands since this arbitration was commenced, have unlawfully aggravated and extended the Parties’ dispute.

The Chinese Government has adhered to the position of neither accepting nor participating in these arbitral proceedings. It has reiterated this position in diplomatic notes, in the “Position Paper of the Government of the People’s Republic of China on the Matter of Jurisdiction in the South China Sea Arbitration Initiated by the Republic of the Philippines” dated 7 December 2014 (“China’s Position Paper”), in letters to members of the Tribunal from the Chinese Ambassador to the Kingdom of the Netherlands, and in many public statements. The Chinese Government has also made clear that these statements and documents “shall by no means be interpreted as China’s participation in the arbitral proceeding in any form.”

Two provisions of the Convention address the situation of a party that objects to the jurisdiction of a tribunal and declines to participate in the proceedings:

(a) Article 288 of the Convention provides that: “In the event of a dispute as to whether a court or tribunal has jurisdiction, the matter shall be settled by decision of that court or tribunal.”

(b) Article 9 of Annex VII to the Convention provides that:
If one of the parties to the dispute does not appear before the arbitral tribunal or fails to defend its case, the other party may request the tribunal to continue the proceedings and to make its award. Absence of a party or failure of a party to defend its case shall not constitute a bar to the proceedings. Before making its award, the arbitral tribunal must satisfy itself not only that it has jurisdiction over the dispute but also that the claim is well founded in fact and law.

Throughout these proceedings, the Tribunal has taken a number of steps to fulfil its duty to satisfy itself as to whether it has jurisdiction and whether the Philippines’ claims are “well founded in fact and law”. With respect to jurisdiction, the Tribunal decided to treat China’s informal communications as equivalent to an objection to jurisdiction, convened a Hearing on Jurisdiction and Admissibility on 7 to 13 July 2015, questioned the Philippines both before and during the hearing on matters of jurisdiction, including potential issues not raised in China’s informal communications, and issued an Award on Jurisdiction and Admissibility on 29 October 2015 (the “Award on Jurisdiction”), deciding some issues of jurisdiction and deferring others for further consideration in conjunction with the merits of the Philippines’ claims. With respect to the merits, the Tribunal sought to test the accuracy of the Philippines’ claims by requesting further written submissions from the Philippines, by convening a hearing on the merits from 24 to 30 November 2015, by questioning the Philippines both before and during the hearing with respect to its claims, by appointing independent experts to report to the Tribunal on technical matters, and by obtaining historical records and hydrographic survey data for the South China Sea from the archives of the United Kingdom Hydrographic Office, the National Library of France, and the French National Overseas Archives and providing it to the Parties for comment, along with other relevant materials in the public domain.

2. The Parties’ Positions

The Philippines made 15 Submissions in these proceedings, requesting the Tribunal to find that:

(1) China’s maritime entitlements in the South China Sea, like those of the Philippines, may not extend beyond those expressly permitted by the United Nations Convention on the Law of the Sea;

(2) China’s claims to sovereign rights jurisdiction, and to “historic rights”, with respect to the maritime areas of the South China Sea encompassed by the so-called “nine-dash line” are contrary to the Convention and without lawful effect to the extent that they exceed the geographic and substantive limits of China’s maritime entitlements expressly permitted by UNCLOS;

(3) Scarborough Shoal generates no entitlement to an exclusive economic zone or continental shelf;

(4) Mischief Reef, Second Thomas Shoal, and Subi Reef are low-tide elevations that do not generate entitlement to a territorial sea, exclusive economic zone or continental shelf, and are not features that are capable of appropriation by occupation or otherwise;

(5) Mischief Reef and Second Thomas Shoal are part of the exclusive economic zone and continental shelf of the Philippines;

(6) Gaven Reef and McKennan Reef (including Hughes Reef) are low-tide elevations that do not generate entitlement to a territorial sea, exclusive economic zone or continental shelf, but their low-water line may be used to determine the baseline from which the breadth of the territorial sea of Namyit and Sin Cowe, respectively, is measured;

(7) Johnson Reef, Cuarteron Reef and Fiery Cross Reef generate no entitlement to an exclusive economic zone or continental shelf;

(8) China has unlawfully interfered with the enjoyment and exercise of the sovereign rights of the Philippines with respect to the living and non-living resources of its exclusive economic zone and continental shelf;

(9) China has unlawfully failed to prevent its nationals and vessels from exploiting the living resources in the exclusive economic zone of the Philippines;

(10) China has unlawfully prevented Philippine fishermen from pursuing their livelihoods by interfering with traditional fishing activities at Scarborough Shoal;

(11) China has violated its obligations under the Convention to protect and preserve the marine environment at Scarborough Shoal, Second Thomas Shoal, Cuarteron Reef, Fiery Cross Reef, Gaven Reef, Johnson Reef, Hughes Reef and Subi Reef;

(12) China’s occupation of and construction activities on Mischief Reef (a) violate the provisions of the Convention concerning artificial islands, installations and structures;

(b) violate China’s duties to protect and preserve the marine environment under the Convention; and

(c) constitute unlawful acts of attempted appropriation in violation of the Convention;

(13) China has breached its obligations under the Convention by operating its law enforcement vessels in a dangerous manner, causing serious risk of collision to Philippine vessels navigating in the vicinity of Scarborough Shoal;

(14) Since the commencement of this arbitration in January 2013, China has unlawfully aggravated and extended the dispute by, among other things:

(a) interfering with the Philippines’ rights of navigation in the waters at, and adjacent to, Second Thomas Shoal;
(b) preventing the rotation and resupply of Philippine personnel stationed at Second Thomas Shoal;
(c) endangering the health and well-being of Philippine personnel stationed at Second Thomas Shoal;
and
(d) conducting dredging, artificial island-building and construction activities at Mischief Reef, Cuarteron Reef, Fiery Cross Reef, Gaven Reef, Johnson Reef, Hughes Reef and Subi Reef; and

(15) China shall respect the rights and freedoms of the Philippines under the Convention, shall comply with its duties under the Convention, including those relevant to the protection and preservation of the marine environment in the South China Sea, and shall exercise its rights and freedoms in the South China Sea with due regard to those of the Philippines under the Convention.
With respect to jurisdiction, the Philippines has asked the Tribunal to declare that the Philippines’ claims “are entirely within its jurisdiction and are fully admissible.”
China does not accept and is not participating in this arbitration but stated its position that the Tribunal “does not have jurisdiction over this case.” In its Position Paper, China advanced the following arguments:

- The essence of the subject-matter of the arbitration is the territorial sovereignty over several maritime features in the South China Sea, which is beyond the scope of the Convention and does not concern the interpretation or application of the Convention;

- China and the Philippines have agreed, through bilateral instruments and the Declaration on the Conduct of Parties in the South China Sea, to settle their relevant disputes through negotiations. By unilaterally initiating the present arbitration, the Philippines has breached its obligation under international law;

- Even assuming, arguendo, that the subject-matter of the arbitration were concerned with the interpretation or application of the Convention, that subject-matter would constitute an integral part of maritime delimitation between the two countries, thus falling within the scope of the declaration filed by China in 2006 in accordance with the Convention, which excludes, inter alia, disputes concerning maritime delimitation from compulsory arbitration and other compulsory dispute settlement procedures;

Although China has not made equivalent public statements with respect to the merits of the majority of the Philippines’ claims, the Tribunal has sought throughout the proceedings to ascertain China’s position on the basis of its contemporaneous public statements and diplomatic correspondence.

3. The Tribunal’s Decisions on the Scope of its Jurisdiction

The Tribunal has addressed the scope of its jurisdiction to consider the Philippines’ claims both in its Award on Jurisdiction, to the extent that issues of jurisdiction could be decided as a preliminary matter, and in its Award of 12 July 2016, to the extent that issues of jurisdiction were intertwined with the merits of the Philippines’ claims. The Tribunal’s Award of 12 July 2016 also incorporates and reaffirms the decisions on jurisdiction taken in the Award on Jurisdiction.
For completeness, the Tribunal’s decisions on jurisdiction in both awards are summarized here together.
a. Preliminary Matters

In its Award on Jurisdiction, the Tribunal considered a number of preliminary matters with respect to its jurisdiction. The Tribunal noted that both the Philippines and China are parties to the Convention and that the Convention does not permit a State to except itself generally from the mechanism for the resolution of disputes set out in the Convention. The Tribunal held that China’s non-participation does not deprive the Tribunal of jurisdiction and that the Tribunal had been properly constituted pursuant to the provisions of Annex VII to the Convention, which include a procedure to form a tribunal even in the absence of one party. Finally, the Tribunal rejected an argument set out in China’s Position Paper and held that the mere act of unilaterally initiating an arbitration cannot constitute an abuse of the Convention.

b. Existence of a Dispute Concerning Interpretation and Application of the Convention

In its Award on Jurisdiction, the Tribunal considered whether the Parties’ disputes concerned the interpretation or application of the Convention, which is a requirement for resort to the dispute settlement mechanisms of the Convention.

The Tribunal rejected the argument set out in China’s Position Paper that the Parties’ dispute is actually about territorial sovereignty and therefore not a matter concerning the Convention. The Tribunal accepted that there is a dispute between the Parties concerning sovereignty over islands in the South China Sea, but held that the matters submitted to arbitration by the Philippines do not concern sovereignty. The Tribunal considered that it would not need to implicitly decide sovereignty to address the Philippines’ Submissions and that doing so would not advance the sovereignty claims of either Party to islands in the South China Sea.

The Tribunal also rejected the argument set out in China’s Position Paper that the Parties’ dispute is actually about maritime boundary delimitation and therefore excluded from dispute settlement by Article 298 of the Convention and a declaration that China made on 25 August 2006 pursuant to that Article. The Tribunal noted that a dispute concerning whether a State has an entitlement to a maritime zone is a distinct matter from the delimitation of maritime zones in an area in which they overlap. The Tribunal noted that entitlements, together with a wide variety of other issues, are commonly considered in a boundary delimitation, but can also arise in other contexts. The Tribunal held that it does not follow that a dispute over each of these issues is necessarily a dispute over boundary delimitation.

Finally, the Tribunal held that each of the Philippines’ Submissions reflected a dispute concerning the Convention. In doing so, the Tribunal emphasized (a) that a dispute concerning the interaction between the Convention and other rights (including any Chinese “historic rights”) is a dispute concerning the Convention and (b) that where China has not clearly stated its position, the existence of a dispute may be inferred from the conduct of a State or from silence and is a matter to be determined objectively.

c. Involvement of Indispensable Third-Parties

In its Award on Jurisdiction, the Tribunal considered whether the absence from this arbitration of other States that have made claims to the islands of the South China Sea would be a bar to the Tribunal’s jurisdiction. The Tribunal noted that the rights of other States would not form “the very subject-matter of the decision,” the standard for a third-party to be indispensable. The Tribunal further noted that in December 2014, Viet Nam had submitted a statement to the Tribunal, in which Viet Nam asserted that it has “no doubt that the Tribunal has jurisdiction in these proceedings.” The Tribunal also noted that Viet Nam, Malaysia, and Indonesia had attended the hearing on jurisdiction as observers, without any State raising the argument that its participation was indispensable.

In its Award of 12 July 2016, the Tribunal noted that it had received a communication from Malaysia on 23 June 2016, recalling Malaysia’s claims in the South China Sea. The Tribunal compared its decisions on the merits of the Philippines’ Submissions with the rights claimed by Malaysia and reaffirmed its decision that Malaysia is not an indispensable party and that Malaysia’s interests in the South China Sea do not prevent the Tribunal from addressing the Philippines’ Submissions.

d. Preconditions to Jurisdiction

In its Award on Jurisdiction, the Tribunal considered the applicability of Articles 281 and 282 of the Convention, which may prevent a State from making use of the mechanisms under the Convention if they have already agreed to another means of dispute resolution.

The Tribunal rejected the argument set out in China’s Position Paper that the 2002 China–ASEAN Declaration on the Conduct of Parties in the South China Sea prevented the Philippines from initiating arbitration. The Tribunal held that the Declaration is a political agreement and not legally binding, does not provide a mechanism for binding settlement, does not exclude other means of dispute settlement, and therefore does not restrict the Tribunal’s jurisdiction under Articles 281 or 282. The Tribunal also considered the Treaty of Amity and Cooperation in Southeast Asia, and the Convention on Biological Diversity, and a series of joint statements issued by the Philippines and China referring to the resolution of disputes through negotiations and concluded that none of these instruments constitute an agreement that would prevent the Philippines from bringing its claims to arbitration."