The makings of a South China Sea agreement between Beijing and Manila

Mark Valencia says with both sides now displaying a willingness to engage, China and the Philippines have a chance to negotiate for mutual benefit

PUBLISHED : Friday, 29 July, 2016, 3:40pm
UPDATED : Friday, 07 July, 2017, 10:02pm

The lords of public international law have spoken. The July 12 award by the Permanent Court of Arbitration regarding the Philippine-China case upheld almost all of the Philippines’ complaints. The most significant aspects of the decision were the denial of China’s nine-dash-line claim to historic waters or rights within it and that none of the Spratly features are legal islands which can generate 200-nautical mile exclusive economic zones and continental shelves. That is what international law “says”. But acceptance and compliance are another matter.

Indeed, this is where international law and political reality diverge. The Philippines is hoping it can now go to the negotiating table with leverage gained from its legal victory. But China has declared that the decision is “null and void” and that it will not observe, implement, comply or even discuss it. So where can they go from here?

Common ground: Philippine President Rodrigo Duterte unites predecessors to discuss South China Sea dispute

The dispute and its resolution will not only affect Philippine-China economic, political and security relations, but have implications for China’s relations with the whole region – and its political stability. Even the United States has called for both parties and the Association of Southeast Asian Nations to explore ways to ease tensions. Indeed, US Secretary of State John Kerry said that Chinese Foreign Minister Wang Yi (王毅) asked him to throw his support behind bilateral talks between Manila and Beijing. This is good news. Kerry visited the Philippines days later and stated: “We hope to see a process that will narrow the geographic scope of the maritime disputes; set standards for behaviour in contested areas; [and] lead to mutually acceptable solutions – perhaps even a series of confidence-building steps”.

To improve relations with its neighbours, China needs to get beyond the decision. As the dust settles, China can take some satisfaction that it has demonstrated its control of some Spratly features and is thereby in a stronger position to negotiate such sovereignty issues. Further, no official in rival claim countries, including the Philippines, has yet suggested that it remove its personnel from the low-tide elevations it “reclaimed”. Moreover, the decision included no “cease and desist” order.

Nevertheless, China has lost face and it and the Philippines are locked in a dilemma. China has declared repeatedly that “no discussion of the decision” is a precondition to any negotiations with the Philippines. For China’s leadership, this will be difficult to back away from because nationalists at home are already aroused. Indeed, given other domestic problems, Xi is already skating on thin political ice.

Justice not served by tribunal’s ruling on South China Sea

New Philippines President Rodrigo Duterte also faces tough domestic obstacles. Even if he wants to change policy towards China, he is limited by the Philippines’ constitution as to how far he can go. As new Philippines Foreign Minister Perfecto Yasay Jnr warns, “a joint development scheme might violate the constitution”. Moreover, if Duterte negotiates with China ignoring the arbitration decision, it may undermine the trust of its regional backers and the US, which supported the Philippines’ legal approach based on the principle of the rule of law.

It is true that the Philippine constitution mandates that the “state shall protect the nation’s marine wealth in its exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens”. It also stipulates the state “may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least 60 per centum of whose capital is owned by such citizens”. A president violating this provision commits an impeachable act.

This is not a theoretical concern. When former president Gloria Arroyo approved a joint seismic exploration undertaking with China and Vietnam in 2005 in areas that included the Philippines-claimed exclusive economic zone and even part of its territorial sea, she was accused of violating the constitution, surrendering sovereignty over Philippines resources, and corruption regarding supposed quid pro quos for doing so.

South China Sea claimants could split the spoils and keep the peace

Auspiciously, it now appears that the Philippines will use the ruling as a guide but will not insist that China recognise it. According to Yasay, “that legal basis will now give way to the diplomatic processes”. Hopefully, China will not insist on a precondition that the Philippines recognise its sovereignty over any of the rocks. Assuming that these initial obstacles can be overcome or put aside, the way forward is replete with possible trade-offs.

First would be a tacit or even explicit agreement to leave the issue of sovereignty over the rocks, including Scarborough Shoal, for future generations to resolve. Next would be agreement to share fisheries access at the shoal and in the 12-nautical-mile territorial sea around it under a regime of “traditional fishing rights” for both. This would build trust.

Why Beijing should seek damage control following the South China Sea decision

Already, the Philippines has rejected the request of Philex Petroleum to lift the moratorium on exploration in its blocks in the South China Sea imposed by the government because of the dispute. As a reciprocal gesture of goodwill, China might reduce its activities on the low-tide elevation features and cease harassing Philippine fishermen and Philippines-sanctioned oil exploration activities in the Philippine exclusive economic zone – when and if they resume. It might also prevent its fishermen from damaging coral reefs and harvesting endangered species.

But to progress further and emulate the lawyers and judges who navigated the UN Convention on the Law of the Sea provisions on exclusions to arbitral jurisdiction, the two need to expand the negotiating arena. Important would be commitment from China to assist in the development of infrastructure in the Philippines. In return could be the sharing of petroleum resources in the Philippine exclusive economic zone. The Philippines cannot share 50/50 because of its constitution but it could give China preferential exploration, development and production rights and terms. And they could agree to manage the resources in the common heritage area created by the decision (that is, the area beyond legitimate exclusive economic zone claims from mainland baselines and territorial seas around the rocks) and invite other Southeast Asian nations to join them.

There are ways out of this conundrum, and hopefully, China and the Philippines will pursue them.

Mark J. Valencia is adjunct senior scholar at the National Institute for South China Sea Studies