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

The wrangling between rival nations over the South China Sea has lasted for centuries, but tension has rapidly increased in the past few years as the various territories press their competing and overlapping territorial claims.

The landmark ruling this month by the Permanent Court of Arbitration that there was no evidence China had historically exercised exclusive control over the waters or resources – a finding Beijing rejects – has led to a stalemate.

Can some kind of radical new approach be found? And could this new approach be founded on delivering some economic benefit sooner, rather than more later? Given that the mineral resources are said to be a main driver of behaviour, one idea would be some form of cooperation on oil and gas operations, such as a joint development area.

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A joint development area is a creature of international law which can be traced back to 1922 when Kuwait and Saudi Arabia established a “neutral zone” in an area where both had laid territorial claims. Now the concept is enshrined in the UN Convention on the Law of the Sea, which has been signed by over 167 nations, and those nations are encouraged to come up with “provisional arrangements” which are specifically designed not to affect any eventual ruling on territory and sovereignty.

A typical joint development area establishes a “regime of joint jurisdiction, use or exploitation for zones of overlap”. The treaty between the competing nations would usually deal with licensing arrangements, tax, title to resources and how the shared zone will be run. The treaty also divides development costs between countries, and determines how production from the area will be shared. How all of this is managed is up to the agreement of the nations. It’s a very flexible model.

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Such an agreement has already been successfully enacted between Thailand and Malaysia, in the Malaysia-Thailand Joint Development Area. After lengthy negotiation, agreement was reached and the production shared: the precedent may well now be followed in the Overlapping Claims Area offshore Thailand and Cambodia.

Although it is tempting to dismiss ideas of cooperation as wildly unrealistic, it is always better to keep talking – after all, what is the alternative? To discuss the development and allocation of the more measurable reserves of oil and gas through a framework such as a joint development area, rather than vague emotionally charged concepts of national sovereignty, would surely be a big step in the right direction. Let’s also not underestimate the power of enlightened self-interest.

Ashley Wright is a partner at Pinsent Masons