ARBITRATION 101: PHILIPPINES V.

CHINA
By Jay Batongbacal
Introduction
The arbitration case launched by the Philippines against China currently stands as the most significant, and most
closely watched, development for specialists and observers of the maritime disputes in the South China Sea
(SCS). To help observers navigate through this foggy proceeding, this article attempts to provide a focused
overview of the arbitration case and developments in the bilateral dispute between the two parties.
Preludes
Although the territorial and maritime issues in the SCS have technically been in existence since the 1930s, the
case of the Philippines against China is a direct result of very recent events arising out of the long-festering
dispute between the two countries. In the aftermath of tensions between the Philippines and China over the
latters facilities in Mischief Reef in 1999 and the conclusion of a maritime delimitation between China and
Vietnam in the Gulf of Tonkin, a modus vivendi was reached with the signing of the 2002 Declaration of Conductof
Parties in the SCS (DOC). By 2005 it appeared that relations between the parties had stabilized enough that their
national oil companies entered into a Joint Marine Seismic Undertaking that was implemented until 2008.
Relations took a downturn, however, in 2009 when submissions were made (one by Vietnam and Malaysia jointly,
and another by Vietnam alone) for areas of the continental shelf beyond 200 nautical miles in the SCS in
accordance with UNCLOS. These immediately prompted Chinas protest and first official publication of its SCS
claim known as the so-called nine dashed line, which was followed by a sharp exchange of diplomatic notes. The
tussle was thereafter followed by a string of increasingly risky confrontations at sea.
On the Philippine side, the SCS disputes came to the attention of the fledgling Presidential administration with
an incident in 2011 involving interference by China Maritime Surveillance ships with a Philippine seismic survey
ship at Reed Bank. Soon after, China lodged a diplomatic protest against the Philippines public auction of
petroleum concession blocks which included two areas between Reed Bank and the Philippine island of Palawan.
The Philippines subsequently lodged its own diplomatic protests against Chinas fishing and military activities in
Reed Bank and nearby areas. Relations increasingly became strained as Chinas press openly warned of military
action, spurring an official response from the Philippines. The exchange of protests continued well into the first
quarter of 2012. Tensions between the two countries reached a head in April that year with a months-long
confrontation between Philippine and Chinese vessels at Scarborough Shoal, which ended when Philippine ships
left the shoal upon a reported agreement for mutual withdrawal in June 2012. Shortly after, however, Chinese
vessels returned and have since been in control of the shoal.
Launching the Case
On January 23, 2013, the Philippine announced that it initiated an arbitration case against China by issuing
a Notification and Statement of Claim in accordance with the dispute settlement provisions of UNCLOS,
particularly under Art. 287 and Annex VII. Both the Philippines and China are signatories to UNCLOS, having
ratified it in 1984 and 2006respectively.
UNCLOS provides for numerous means of peaceful settlement of maritime disputes, which include non-binding
means between the disputing parties and binding means involving third parties such as arbitration and
adjudication. While all States may resort to any of the non-binding means at any time, Art. 287(3) requires them to
select their preferred binding means involving third parties. If they do not do so, they are deemed to have selected
arbitration under UNCLOS Annex VII as the mode of dispute settlement. Any selection, however, is subject to
certain express limitations under Art. 297(2) and 297(3) and/or optional exceptions under Art. 298(1).
Since neither the Philippines nor China expressed any preferred third-party dispute settlement mechanism in their
ratifications, both are deemed to have selected arbitration as the means to settle maritime disputes between them
concerning the interpretation and application of UNCLOS, unless any of the express limitations and optional
exceptions are applicable.
China formally rejected the Notification and Statement of Claim and returned it to the Philippines on February 19,
2013. However, under Art. 9 of UNCLOS Annex VII, the absence of a party or its failure to defend the case does
not bar the proceedings.
Art. 3 of UNCLOS Annex VII provides for constitution of a five-member arbitral tribunal. The Philippines began the
process through the nomination of Rudiger Wolfrum as arbitrator in its Notification and Statement of Claim. China
had 30 days to likewise nominate one arbitrator, but did not do so in light of its rejection of the arbitration.
Normally, the arbitral tribunal is constituted upon mutual agreement of the parties to the case, but light of the

rejection and refusal of China to participate, Annex VII authorizes the President of the International Tribunal on the
Law of the Sea (ITLOS), upon request of the initiating party, to appoint the arbitrator on its behalf. This was done
with the appointment of ITLOS judge Stanislav Polack as the second tribunal member on March 25, 2013.
Subsequently, likewise upon request of the Philippines, the President of ITLOS appointed the remaining three
members of the tribunal, namely Jean-Pierre Cot, Chris Pinto, and Alfred Soons. Chris Pinto was
subsequentlyreplaced by Thomas Mensah, who was also appointed President of the Tribunal on June 24, 2013.
The Tribunal subsequently met for the first time at the Peace Palace in The Hague on July 11, 2013.
China reiterated its rejection of the proceedings in a Note to the Tribunal on August 1. The Tribunal thereafter
issued its first Procedural Order on August 27. The Order designated the Permanent Court of Arbitration (PCA) to
act as registry of the proceedings, and adopted the Tribunals Rules of Procedure and initial timetable. The
Tribunal is actually a separate entity and independent of either the ITLOS or the PCA; by being the registry, the
PCA primarily hosts the tribunal and provides its administrative support.
The Substantial Stage
Likewise in its first Procedural Order, the Tribunal fixed March 30, 2014 as the date on which the Philippines was
to submit its Memorial, which is the principal pleading stating its case in full. The Philippines was asked to fully
address all the issues, including matters relating to the jurisdiction of the Tribunal the admissibility of its claims,
and the merits of the dispute.
Pending submission of the Memorial, tensions between the parties continued to rise. In mid-2013, the
Philippines noted and protested the increased frequency and proximity of China Maritime Surveillance ships
around its outpost the Second Thomas Shoal, as well as the reported blocking of a Philippine civilian vessel on its
way to Pag-asa Island. Concrete blocksfound by a surveillance flight to Scarborough Shoal were mistaken to be
preparations for a permanent Chinese facility on the reef; they were later determined to be from previous and
long-forgotten wrecks. In January and February 2013, it was reported that Chinese ships had used water
cannon against Philippine fishing boats. The most serious incident occurred in March, just prior to the deadline for
submission of the Memorial, when China Maritime Surveillance ships prevented a Philippine Navy ship from resupplying and replacing personnel on its outpost on Second Thomas Shoal. Several weeks later, another ship
with journalists on board successfully evaded Chinese ships blocking its path and was able to carry out the
resupply and personnel rotation.
On March 30, 2014, the Philippines submitted to the Tribunal and China a lengthy Memorial, which is not public
but reportedly comprises 4,000 pages of arguments, documents, and maps. The Tribunal thereafter convened on
May 14, and gave China until December 15 to submit its Counter-Memorial in response to the Philippines.
However, China reiterated that it did not accept the arbitration proceedings in a note to the Tribunal on May 21
Meanwhile, since 2012, South China Sea issues have prompted the Philippines to renew and strengthen its
military alliance with the United States. Several months of negotiations culminated in the signing in April 2014 of
the Philippines-US Enhanced Defense Cooperation Agreement (EDCA), to supplement existing arrangements
with the US for mutual logistics support and visiting forces. The agreement was signed just in time for a brief visit
of U.S. President Barack Obama to Manila on his official tour of Asia. It is intended to assist the Philippines in
modernizing its armed forces and developing its capabilities, particularly in the areas of maritime security and
maritime domain awareness.
Subsequently, in May 2014, the Philippines arrested a group of Chinese and Filipino fishermen engaged in an
illegal trade of 500 endangered marine turtles at Half-Moon Shoal, which is even closer to the Philippines than
Second Thomas Shoal but also claimed by China.China accused the Philippines of provocation and demanded
the release of its fishermen. This was followed by the release of surveillance photographs of land
reclamation taking place on a massive scale and at rapid pace on Johnson South Reef. Similar activities have
been reported on Cuarteron Reef, McKennan Reef, and Gaven Reef. Subsequently, similar reclamation was
confirmed in Fiery Cross Reef. Despite the Philippines repeated protests, the reclamation activities continue
unabated.
As China deployed an oil rig off the coast of Vietnam in the same month, the Philippines called for a moratorium
on all activities that created tensions. This was later formally proposed as the first and immediate part of a Triple
Action Plan to manage the territorial and maritime disputes. The second involves full implementation of the 2002
DOC and conclusion of a regional Code of Conduct, while the third proposes the establishment of a binding
dispute settlement mechanism. China rejected this proposal.
Tensions began to ease somewhat as the year drew to a close. In November 2014, Philippine President Benigno
S. Aquino III and Chinese President Xi Jinping met for the first time on the sidelines of the APEC summit in
Beijing. However, the December 15 deadline for submission of Chinas Counter-Memorial had some unexpected
results that were technically outside of the proceedings.

External Events
On December 5, the United States released an official report which analysed Chinas claims to the SCS, and
declared that its nine-dash line claim could only be internationally acceptable as a claim to territorial sovereignty
over the islands inside the lines. Insofar as the waters beyond those islands is concerned, the claims could only
be valid if made in accordance with UNCLOS. The State Department paper criticized Chinas ambiguity over the
nature of its claims, and denied the validity of its claims to historic title or historic rights that it sometimes
expresses in official statements.
At the same time, Vietnam quietly submitted a confidential statement to the Tribunal regarding the case. Vietnam
stated that it requested the Tribunal to pay due regard to the legal rights and interests of Vietnam, but recognized
the Tribunals jurisdiction over the case and supported the Philippines arguments against the legality of Chinas
nine-dash line claim. The statement has not been released to the public.
Two days later, China publicly released a position paper outlining its objections to the jurisdiction of the arbitral
tribunal while reiterating that it was not participating in the proceedings. It asserted that the case was essentially
founded on the issue of sovereignty over the islands and other maritime features in the SCS, and that even if the
Tribunal were to disregard these sovereignty questions, it could not decide on the Philippine claims without first
undertaking maritime delimitations. This meant that either way, the case falls outside the Tribunals jurisdiction
since it is within the optional exceptions to the jurisdiction of binding dispute settlement mechanisms that China
invoked in a 2006 declaration in accordance with the terms of UNCLOS Art. 298(1). China also argued that the
Philippines was acting in bad faith and abusing its rights under the UNCLOS by unilaterally taking China to
arbitration.
Status of the Proceedings as of January 2015
On December 17, 2014, the Tribunal issued its third Procedural Order. It recorded that China did not submit a
Counter-Memorial, and reiterated its decision to neither accept nor participate in the arbitration. The Tribunal
acknowledged that its members had been furnished with copies of Chinas public position paper while noting that
it also expressly stated that the position paper should not be regarded as acceptance or participation in the
proceedings.
In accordance with its Rules of Procedure, the Tribunal gave the Philippines until March 15, 2015 to submit a
supplemental submission on the Tribunals jurisdiction and the merits of the case, in particular to address the
points raised by Chinas position paper. After the submission, China will have a similar period of 90 days within
which to file a response.
The Tribunal also acknowledged receipt of Vietnams statement.
The Philippine Claims
The Notification and Statement of Claim of the Philippines contains numerous claims against China, but these can
all be summarized briefly into the following major groups:
First, the Philippines asserts that China is claiming rights and entitlements far in excess of what has been agreed
upon by the international community in UNCLOS. These excessive claims are signified by the nine-dash line map,
which China has invoked against the Philippines to justify its claims to sovereignty, jurisdiction, historic title, or
historic rights over maritime areas or activities within those lines. The Philippine argues that Chinas claims to
maritime rights or entitlements based on the nine-dash line map are contrary to UNCLOS and invalid. However, it
acknowledges that any issues regarding sovereignty over the land features within those lines are not within the
jurisdiction of the Tribunal, and therefore does not seek a ruling from the Tribunal on those issues.
Second, the Philippines argues that China has illegally occupied or controlled eight features within the SCS.
Specifically, it occupies Fiery Cross, Cuarteron, Subi, McKennan, Johnson South, Gaven, and Mischief Reefs,
and has taken exclusive control of Scarborough Shoal. The Philippines argues this is based on illegitimate claims
to title or sovereignty over completely submerged areas, or historic rights to living and non-living natural
resources, including control of maritime navigation. It argues further that China has claimed excessive maritime
rights and entitlements from these maritime features that it presently occupies or controls, which should be
governed by Art. 121 of UNCLOS.

At various instances, China has prevented the Philippines from lawfully exploring and exploiting the marine
resources within or around these reefs. It is argued that Chinas actions against Philippine ships and activities
around these areas, and indeed throughout the area within the nine-dash line, assert claims to rights and
entitlements far beyond those allowed under Art. 121. The Philippines acknowledges that at most, Scarborough,
Johnson South, Cuarteron, and Fiery Cross reefs may be entitled to 12 nautical mile territorial sea zones on
account of rocky protrusions above water at high tide, but no more; Chinas claims or activities beyond this
distance from the features are illegal in international law. The remaining occupied features do not generate any
maritime zones at all, and therefore they are on the seabed that are parts of the Philippines continental shelf and
subject to the latters exclusive rights and jurisdictions under UNCLOS.
Third, the Philippines asserts that China has unlawfully claimed rights or entitlements to, and unlawfully exploited
living and non-living natural resources in other areas within the Philippines Exclusive Economic Zone and/or
Continental Shelf, while preventing the latter from doing so. It is also asserted that China has unlawfully interfered
with its rights to navigation under UNCLOS. The Philippines argues that Chinas claim based on the nine-dash
line map cuts off and deprives the Philippines of its maritime entitlements to those maritime zones under
international law.
The Philippine jurisdictional zones in the South China Sea are collectively and officially described in Philippine
domestic parlance as the West Philippine Sea. The term West Philippine Sea is used by the Philippines to refer
to the maritime areas within its sovereignty or jurisdiction in accordance with UNCLOS, and is located within the
geographic area of the South China Sea but directly adjacent to its islands.
On the basis of these arguments, which are likely dealt with in great detail in the lengthy but still confidential
Memorial, the Philippines seeks reliefs in the form of a number of declarations and orders from the Tribunal. The
most important of these is a declaration of invalidity under international law of Chinas claims based on the ninedash line map, and that Chinas maritime rights and entitlements can only be those based on UNCLOS. Other
reliefs sought include a declaration that Chinas occupation and facilities on the various reefs are illegal, as well as
an order for China to end its occupation thereof. It is also requested for the Tribunal to order China to bring its
domestic legislation in accordance with UNCLOS, and stop preventing Philippine vessels from lawfully exploring
and exploiting the natural resources of the area, as well as any other activities inconsistent with UNCLOS. The
Philippines also asks the Tribunal to declare that the Philippines is fully entitled to its 12 nautical mile territorial sea
and 200 nautical mile EEZ and continental shelf measured from its archipelagic baselines as enacted in 2009.
Chinas Counter-Arguments
The position paper released by China on December 7, 2014 deals only with the issue of the jurisdiction of the
Tribunal, and does not delve into the merits of the Philippine case. From Chinas standpoint, the Tribunal does not
have jurisdiction over the case filed by the Philippines mainly on the following procedural and substantive
grounds:
First, China asserts that the subject matter of the arbitration is, at its core, a dispute over territorial sovereignty
over the various features of the Spratly Islands and Scarborough Shoal. China claims absolute sovereignty over

those features on various historical and legal grounds, contrary to the Philippines own claims to some of those
features. It argues that unless the question of sovereignty over those features is first determined, the issue of who
may lawfully exercise the maritime rights and entitlements around them cannot be resolved: the issue of
sovereignty over the land and rights over the adjacent seas are inseparable. Since the issue of territorial
sovereignty has been expressly excluded by the Philippines from the case, China concludes that it cannot have
jurisdiction over the dispute.
Second, China argues that even if the Tribunal could resolve the maritime dispute without dealing with the
question of sovereignty over the adjacent land features, it cannot decide on the Philippines claims without first
undertaking a maritime delimitation. China points to the geography of the area, which aside from the features it
currently occupies and included in the case, contains numerous other features such as large islands and other
rocks above high tide, including the largest island Itu Aba. China argues that the Philippine case dissects the
Spratly island group, distorts the nature and scope of the dispute between the two parties, and avoids questions
as to the validity of the Philippines own claims to some of the islands; these show that the geographic extent of
the Philippines own maritime jurisdiction is still undetermined, and therefore its own claims cannot be decided
upon by the Tribunal.
Third, building on the two previous arguments, China invokes the optional exclusion from jurisdiction under Art.
298, which China exercised through its 2006 declaration. It argues that the right granted to States to exercise this
optional exclusion, and the complementary prerogative of States to choose the means for settlement of disputes
under Art. 299, would be rendered meaningless. China views the action of the Philippines of unilaterally initiating
arbitration as an abuse of the compulsory dispute settlement procedures of UNCLOS. In addition, China also sees
it as contravening existing agreements between China and the Philippines, such as the 2002 DOC, to seek a
negotiated solution, and other agreements reached between the two countries throughout the 1990s meant to
improve the relations between them, as well as the entire region, in spite of the dispute. China further asserts that
the actions of the Philippines as a whole to be in bad faith because it seeks a maritime delimitation in disguise,
and ignores the need for the two countries to resolve the issues in dispute directly through negotiations.
What Next?
Since arbitration was launched in January 2013, incidents over disputes territories and in disputed waters have
continued, and we might expect these to do so for the foreseeable future despite legal proceedings. But there
may also be opportunities for reducing tensions and minimizing the risk of escalation if incidents do arise. A
number of flashpoints for either conflict or cooperation may be considered:
The Philippines will surely make a supplemental submission as requested by the Tribunal in order to address the
points raised in Chinas position paper. Its counsel has welcomed the position paper as providing concrete
targets for future proceedings.
The Philippines will continue supplying its positions and personnel based in the Spratly Island group, but without
moving to maintain or repair damaged facilities and equipment in order to maintain the moral high ground in the
arbitration. However, given the precarious state of the derelict ship that it uses as an outpost on Second Thomas
Shoal, there is a possibility of an incident should the ships structure finally yield to the unforgiving sea. Maritime
encounters involving interference, and even collision, with Philippine ships are also still possible.
As the Philippines continues to receive assistance and support in maritime capabilities from countries like
the U.S. and Japan, it will continue to create as great a presence in maritime law enforcement as it can with its
limited assets. It can be expected to pursue fishery enforcement patrols by military or civilian services. The
possibility remains that Chinese fishermen will be arrested and brought to trial, especially in cases of marine
environmental and fishery offenses in the near-shore areas. In light of Chinas more assertive and proactive
protection of its fishermen, this will be a likely source of new tensions.
Since 2012, China has reportedly been organizing and mobilizing its civilian fishing fleet into a maritime militia.
Such a militia could also extend its range through Chinas artificial islands, and the concentration of such a fleet
increases the possibility of even more incidents between them and fishers of other countries, as civilian militias
could be expected to have a little less discipline and act more unexpectedly than trained armed forces.
Chinas reclamation activities are expected to resume or continue at their very rapid pace since 2014, and it is
likely that at least one of these new artificial islands will achieve an interim operational capability that will give
China round-the-clock and year-long maritime surveillance initially within the Spratly region, and later in the whole
nine-dash line area. Enforcement capability will follow thereafter, as surveillance will allow China to more
efficiently allocate and utilize its maritime enforcement fleet. Surveillance coverage and efficient enforcement
could also lead to confrontations taking place in new areas within the Spratly region that previously had not been
the scene of such activities.

The conclusion of talks between the US and China for a MOU establishing rules for safety in air and naval
encounters may serve as a model for the initiation of similar arrangements between the Philippines and China.
There is a need for such an arrangement given the recent history of encounters between Philippine and Chinese
ships in the disputed areas.
Activities implementing the EDCA signed last April 2014 will likely commence sometime in 2015, unless the
Philippine Supreme Court rules against its constitutionality, or directs that it be subject to Senate ratification, in the
case currently pending before it. EDCA is envisioned to play an important role in the modernization of the
Philippine armed forces, including the maritime services. Initial plans for the agreement included the development
of Oyster Bay in Palawan as a naval base directly accessible to Reed Bank and the disputed areas. If it pushes
through, it may become another irritant in relations between the parties even though it is entirely within the
Philippine archipelago.
The consortium that owns Service Contract 72 on a concession area in Reed Bank has announced that it will
undertake drilling operations by 2016. The consortium attempted to negotiate an agreement with China in order to
proceed with petroleum operations, but to date, the political aspects of the dispute have hindered commercial
imperatives. However, financial and management considerations may drive a decision to drill, as the consortium
may have already made commitments to its investors since 2010 when the service contract was awarded.
The Philippines will host APEC in December 2015. Given the tentative steps toward at least a more normal
relationship demonstrated in the Aquino-Xi meeting last year, and with the arbitration now in full stride, some room
may finally be generated for reaching at least a new modus vivendi that reduces the possibility of sudden
escalating conflict. This, however, depends very much on diplomatic initiatives and greater sensitivity to the
prevention of untoward incidents.
As these and other events unfold, the arbitration will keep apace with the timetable established by the Tribunal.
Assuming that the Philippines submits its supplemental pleading in response to Chinas position paper on the
March 15 deadline, the Tribunal will wait another 90 days for China to submit a rejoinder, no matter how unlikely it
may be for such to be given. This means that the next major milestone will be reached in the middle of June 2015.
A ruling on the jurisdictional issue may be expected anytime within 3 to 6 months after the middle of June 2015.
This is on account of the importance of the crucial issue of jurisdiction, the pace at which the Tribunal has
proceeded thus far, and assuming that a hearing on oral arguments is not called for, and that Vietnams statement
does not result in additional proceedings. The latter depends largely on the results of consultations on the matter.
This ruling will determine whether the case will terminate at this stage or proceed any further.
Source: http://amti.csis.org/arbitration-101-philippines-v-china/