The successful Philippines legal challenge against Chinese maritime claims in the South China Sea has been described as “the most significant international legal case for almost the past 20 years”.

The determination was made by an international tribunal constituted under the UN Convention on the Law of the Sea (UNCLOS or the Convention) and is final and binding on the parties. 

Beijing has rejected the ruling in strong terms, but it is likely to increase global pressure on China to scale back its expansion in the South China Sea. There is, however, no mechanism to compel compliance.

Regional players, including the Philippines, have called for calm and a commitment to peaceful talks with China, amid fears that the outcome of the arbitration could lead to heightened tensions in one of the world’s most important trade routes.

The award

The 500-page award held that there was “no legal basis” for Chinese maritime claims based on historic rights within the so-called ‘nine-dash line’. 

There was no evidence that China had historically exercised exclusive control over the waters of the South China Sea or its resources. Even had any such rights existed, they would have been extinguished to the extent they were incompatible with the exclusive economic zones provided for in UNCLOS.

Importantly, the Tribunal did not (and did not have jurisdiction to) determine sovereignty claims over land territory in the South China Sea. The issue of sovereignty over the Spratly Islands – the archipelago at the centre of the dispute – remains unresolved.

It did, however, determine the status of the Spratly Islands. Although many of the reefs have been heavily modified by construction works, the Tribunal had to ignore these effects as UNCLOS classifies features on their natural condition. On this basis, the Tribunal found that the Spratly Islands were “[r]ocks which cannot sustain human habitation or economic life” and, accordingly, held that none of the Spratly Islands is capable of generating extended maritime zones.

The Tribunal held that China had violated the Philippine’s sovereign rights within its exclusive economic zone, including by interfering with Philippine fishing and petroleum exploration and by constructing artificial islands. This large-scale land reclamation and construction had caused severe harm to the marine environment, and violated China’s obligation to preserve and protect fragile ecosystems and the habitat of depleted, threatened or endangered species. China had also violated its obligations to refrain from aggravating or extending the issues in dispute.

China’s response

China’s president, Xi Jingping, rejected the Tribunal’s award and said that China’s “territorial sovereignty and marine rights” in the South China Sea would not be affected. But he insisted China was still “committed to resolving disputes” with its neighbours.

There is some indication of a subtle decoupling of China’s maritime claims and the ‘nine-dash line’, which was roundly rejected by the Tribunal. According to English language commentators, Chinese state news agencies have led with variations of the headline: ‘Xi Jinping says South China Sea Islands have always belonged to China’ — a statement the Tribunal did not challenge. Chubb suggests that “[d]riving attention towards this tough-sounding stance on territorial sovereignty” may provide political cover for the quiet clarification of China’s maritime rights claims toward a position that is more UNCLOS-consistent.

Notwithstanding the scope for subtle manoeuvring, Beijing has vowed to take decisive action against any provocations in the South China Sea. Over the last few days, it has continued to block Filipino fishing vessels from approaching the contested Scarborough Shoal, and has lambasted Japanese “hype” and interference. The risk of misstep triggering conflict remains.

The ASEAN response

The ruling will no doubt be high on the agenda at this week’s ASEAN foreign ministers’ meeting in Laos. So far, there has been a muted, but relatively consistent response from ASEAN leaders, calling for restraint and further discussions.

The Philippines’ President Rodrigo Duterte has called for calm, and has indicated an intention to send former President Fidel Ramos to begin negotiations with Beijing.

New Zealand’s position

New Zealand, too, has called for further discussions, in a response that arguably pulls back on some of the stronger rhetoric we heard earlier in the year. Foreign Affairs Minister Murray McCully has said he hopes the ruling will “provide a platform for resolving the longstanding and complex issues in the South China Sea” and has urged parties to work towards that end.

New Zealand is walking a difficult tightrope in its response to the decision. On the one hand, New Zealand is a long-standing proponent of multilateralism and the rule of international law. New Zealand will be under pressure from the US and Australia to support the ruling. On the other, any indication that New Zealand is “taking sides” in the South China Sea will raise hackles in Beijing, and has the potential to sour New Zealand’s trading relationship with China.  

But can New Zealand afford to take a neutral back seat on the South China Sea?

New Zealand’s UN Security Council campaign leveraged our track-record as a fair-minded, independent multilateralist and called for more effective early engagement by the international community to prevent disputes spilling over into conflict.

Conflict in the South China Sea would have profound implications for the Asia Pacific region. Arguably, New Zealand has an obligation to show leadership in seeking peaceful settlement of the dispute.

But that does not mean taking an aggressive stance against China, which can only be counter-productive. This need not be a zero-sum game (the Tribunal’s decision does not settle the totality of issues arising in the South China Sea), and there is nothing to be gained by backing China into a corner. A negotiated outcome will require patience and tact, understanding the complex interests driving behaviour, and working towards an acceptable compromise solution.

John Key is in Indonesia this week, and discussions will no doubt turn to the South China Sea. New Zealand has an opportunity to use its reputation and its relationships in the region to encourage parties to chart a course toward de-escalation and peaceful resolution of the South China Sea dispute.

This article was written by Chapman Tripp senior solicitor Kate Yesberg and first appeared in Asia New Zealand Foundation's Bulletin, which can be accessed here.