Prospects and Challenges for China after the South China Sea Arbitration
By Alvin Cheng-Hin Lim

Prospects and Challenges for China after the South China Sea Arbitration

Jul. 19, 2016  |     |  0 comments

China has firmly rejected and denounced the July 2016 award by the Permanent Court of Arbitration (PCA) at The Hague on the arbitration initiated by the Philippines on its dispute with China over the South China Sea. China’s state-owned Global Times described the award as an “illegal verdict” which was “more radical and shameless than many people had ever expected,” and Chinese President Xi Jinping reaffirmed the long-standing Chinese government position that China would not accept any claim or action based on the award, which it sees as an unjust infringement of its sovereignty (Graham, 2016; Kor, 2016; “Arbitration award,” 2016). As Graham Allison (2016) reminds us, China’s reaction to the unfavorable PCA arbitral award is not unusual for a great power:

“No permanent member of the UN Security Council has ever complied with a ruling by the PCA on an issue involving the Law of the Sea. In fact, none of the five permanent members of the UN Security Council have ever accepted any international court’s ruling when (in their view) it infringed their sovereignty or national security interests.”

China’s Vice Foreign Minister Liu Zhenmin reiterated his accusation that the PCA tribunal was biased against China, and suggested that then-president of the International Tribunal for the Law of the Sea Shunji Yanai, who had nominated four of the five arbitrators after China refused to participate in the arbitration process, was “unfriendly to China” and had exercised undue influence over the tribunal during its arbitration proceedings.

However, some observers have argued that China did not fully appreciate the implications of its choice not to participate in the arbitration process. Not only did it give up its right to appoint the arbitrators, it also gave up its right to present its legal arguments and evidence to the tribunal and to the international audience of the arbitration proceedings (Chun, 2016; Liu, 2016; J. Wang, 2016; Z. Wang, 2016). More significantly, China did not appear to have anticipated that the PCA arbitral award would invalidate its historic claims to the South China Sea as mapped by the nine-dash line, or that the arbitrators would find that these historical claims had been superseded the moment China ratified the UN Convention on the Law of the Sea (Graham, 2016; Zhen, 2016). As Zheng Wang (2016) points out:

“When China took part in negotiating the United Nations Convention on the Law of the Sea (UNCLOS) from 1973 to 1982, the Chinese decided to stand with the Third World countries and supported the demand for a 200 nm Exclusive Economic Zone (EEZ). The Chinese diplomats at that time totally forgot about the South China Sea and the nine-dash line. They put ideology above national interests and failed to realize that the 200 nm EEZ would bring unthinkable contradictions to China’s claims in the South China Sea, as the neighboring countries’ EEZs would overlap with the nine-dash line.”

In lieu of engaging in legal proceedings at the PCA tribunal, China instead sought to “change the facts on the water” with its “audacious programme of land reclamation and militarization of atolls” (Sceats, 2016). While the Chinese government has since claimed that the island reclamation works had been “carefully designed … to minimize ecological effect,” marine biologists have identified significant ecological damage to the South China Sea caused by these unprecedented construction projects, and the PCA tribunal, in its arbitral award, found the “damage to coral reefs and other fragile ecosystems” to be a “violation of China’s obligation, under UNCLOS, to preserve and protect marine habitats” (Allen-Ebrahimian, 2016; Graham, 2016; Van Sant, 2016).

While the PCA lacks an institutional enforcement mechanism for its arbitral awards, international pressure can encourage implementation of these awards (Esmaquel II, 2016b). The PCA award in the Philippines v. China arbitration case is likely to be followed with intensified US military activity in the South China Sea to enforce freedom of navigation in the contested waters (Larter, 2016). The Philippines is also coordinating with the US, Vietnam, Malaysia, and Indonesia to organize joint patrols in the South China Sea, and is working with countries like India to obtain the naval hardware needed for such patrols (Babb, 2016; Ismail, 2016; Mogato, 2016; “India Assisting Philippines,” 2016). In addition, France has called for joint EU naval patrols of the South China Sea to ensure freedom of navigation for European shipping in the contested waters (Chen, 2016).

Apart from concerns over possible clashes between these naval vessels and those of the Chinese navy and coast guard, analysts have also highlighted the paramilitary role of China’s long-distance fishing fleet as an irregular maritime militia that has helped advance China’s claims in the South China Sea, sometimes even through the use of force. Vietnamese fishermen, for example, have reportedly had their fishing vessels rammed or sunk in the contested waters around the Paracel Islands. Analysts predict other claimant states to the South China Sea will follow China’s example and militarize their fishing fleets. Vietnam, for example, has been developing a maritime militia since 2009. The increased presence of militarized fishing vessels in the South China Sea increases the chances of the breakout of an armed conflict in the contested waters (Erickson & Kennedy, 2016; Kerkvliet, 2016; Mollman, 2016; “Why China Is Arming,” 2016).

Experts note that Vietnam should expect a similar award for its claims in the Spratly and Paracel Islands should it follow the example of the Philippines and file for arbitration.

In its arbitral award to the Philippines, the PCA tribunal ruled that the territorial sea extending 12 nautical miles around the Scarborough Shoal is a common fishing ground for Filipino fishermen and fishermen of other nationalities — including the Chinese — and that the use of force to prevent any country’s fishermen from the use of this common fishing ground would be a violation of their traditional fishing rights. The PCA tribunal also found Mischief Reef, Second Thomas Shoal, and Reed Bank to be low-tide features located within the EEZ of the Philippines (Fonbuena, 2016).

Experts note that Vietnam should expect a similar award for its claims in the Spratly and Paracel Islands should it follow the example of the Philippines and file for arbitration (Moreno, 2016). As Paul Reichler, the Philippines’ lead counsel at the PCA arbitration proceedings, has noted, while the arbitral award is only legally binding on China and the Philippines, it also has legal implications for the other claimant states in the South China Sea dispute, especially Vietnam, Malaysia, and Indonesia (Esmaquel II, 2016a).

In the meantime, impacts continue to accrue on China’s international reputation as countries like Bosnia-Herzegovina, Fiji, India, Poland, and Slovenia publicly deny claims published in the Chinese state media that they support China’s position on the South China Sea arbitration (Balachandran & Huang, 2016; Baruah, 2016; Page, 2016; Lim, 2016a). Diplomatic tensions arising from the South China Sea dispute have also caused China-ASEAN relations to sink to the “lowest point in years,” as was illustrated by the contentious June 2016 special meeting of ASEAN foreign ministers in Kunming, when they reportedly rejected a consensus statement that had been prepared for them by the Chinese government, and then attempted but failed to issue their own consensus statement expressing the region’s concern over the deterioration of the South China Sea dispute. As the Financial Times notes, similar tensions between China and the ASEAN nations in 2010 allowed the Obama administration to implement the US military “pivot” to Asia, with the Southeast Asian littoral states in particular welcoming the increased US presence in the South China Sea (Mitchell, 2016; Parameswaran, 2016; Tweed & Roman, 2016).

Within the ASEAN regional grouping, Cambodia and Laos have lobbied the other ASEAN members on behalf of China (Mitchell, 2016). It is likely that Cambodia will expect a further deepening in economic cooperation with China in exchange for further advocacy efforts in ASEAN on behalf of China (Lim, 2015c). Indeed, Cambodian Prime Minister Hun Sen recently announced at the Asia-Europe Summit in Ulaanbaatar, Mongolia that Cambodia is the beneficiary of USD 600 million in additional aid from China (“Cambodia to receive,” 2016). The Laotian government is likely to expect not just an increase in Chinese aid, but also a more favorable financing package from China for the construction of the Kunming-Vientiane high speed rail line, China’s showpiece project in Southeast Asia for its Silk Road Economic Belt development plan (Lim, 2015b). The commencement of construction in Laos of this rail project had been delayed because of disagreements between China and Laos over the financing of the project (Goh & Webb, 2016).

In the case of the Singapore-Kuala Lumpur high speed rail line, the Singaporean government reportedly favors the Japanese and European bids, while the Malaysian government reportedly favors the Chinese bid (Martin, 2016). However, as Malaysia is one of the claimant states in the South China Sea dispute, its perception of China’s reaction to the PCA arbitral award could become a political risk factor affecting its decision on China’s high-speed rail bid. Likewise, dissatisfaction with China’s reaction to the PCA arbitral award could pose a political risk to China’s efforts to secure infrastructure construction projects in Indonesia under its 21st Century Maritime Silk Road development plan. China and Indonesia had earlier considered cooperating on a range of energy, industrial, and transportation infrastructure construction projects under the Maritime Silk Road framework, including the development of seaports, airports, and special economic zones (Lim, 2015a, p. 37). However, in the weeks before the PCA tribunal’s arbitral award, the Indonesian government suddenly announced its award of medium-speed rail and port development projects to Japan (Budiman, 2016; Vatvani, 2016). Should China wish to continue pursuing its vision of the 21st Century Maritime Silk Road in Indonesia, it will have to work to ensure that Indonesia’s turn to Japan is temporary, and that future infrastructure projects will be awarded to China.

In the case of the Philippines, the recently-elected Duterte administration has indicated its willingness to reopen negotiations with China over joint exploration of resources in the South China Sea. However, President Duterte has also indicated that he will not be open to deals which could weaken Philippine sovereignty. The PCA arbitral award further reduces the possibility that any “horse-trading” over South China Sea assets between China and the Philippines could happen (Lim, 2016b; Lee, 2016).


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