Imagining bilateral negotiation in the South China Sea

China has made two main points in response to last year’s judgment of the arbitration tribunal concerning the South China Sea. First, China has declared that the award is null and void, and has no binding force. Second, it maintains its position that it will solve the dispute bilaterally through individual negotiations with the states concerned.

China’s intention to solve the South China Sea dispute through bilateral negotiations has raised negative sentiments. It should not be forgotten, however, that it has the right to do so. One of the fundamental principles of international law, as prescribed in Article 33 of the United Nations Charter, is the peaceful settlement of disputes between the states concerned, and one of the options for such settlement is through negotiations. Thus, China’s desire to settle the dispute through bilateral negotiations is in fact in line with international law.

The important issue now is what disputes in the South China Sea can be settled through negotiations? This is probably one of the most complex disputes in international law. It involves questions regarding the interpretation and application of the United Nations Convention on the Law of the Sea (UNCLOS) with regard to the validity of China’s nine-dash line, and the maritime zone entitlement of the features in the South China Sea. The award of the Permanent Court of Arbitration at The Hague for the Philippines against China concerning the South China Sea has resolved this issue. However, the core issues of the disputes over ownership of maritime features and the maritime delimitation need to be solved directly between the claimants.

It is worth noting that no territorial disputes, whether an ownership or delimitation dispute, have been solved through a regional or even international mechanism. None of the existing regional or international bodies have a mandate to do so, nor can they serve as a supranational entity. Although a number of territorial disputes have been settled through the international adjudication process, it has been done so by the consent of the relevant parties. The case of Pedra Branca, for example, was jointly submitted to the International Court of Justice by Malaysia and Singapore. The settlement, through international adjudication, does not remove the bilateral nature of the dispute settlement – that it is between themselves.

Next, it is necessary to identify the object of the dispute carefully. It is not correct to look at the entire South China Sea ownership dispute as one package, because not all claimants are claiming all the features in the South China Sea.

One notable example is Scarborough Shoal. This feature is only claimed by China and the Philippines. Neither Brunei, Malaysia nor Vietnam have a claim. This is an example where bilateral negotiations, between China and the Philippines, can take place to resolve the ownership dispute. Another example is the Paracel Islands. Maritime features in the Paracel Islands are only claimed by China and Vietnam. In this case, bilateral negotiations between China and Vietnam can take place to resolve the ownership dispute.

Certainly, the more difficult part involves features with more than two claimants, particularly in the Spratly Islands group. For these features, all claimants must negotiate to resolve the ownership dispute. Nonetheless, isolating the features that can be resolved bilaterally, as a first step, will significantly reduce the area of dispute.   

Therefore, the first necessary step for all claimants is to clarify their claims, in particular, identifying which features they are claiming. China, which has claimed virtually everything, has clarified its ownership claim, including via a position paper released in December 2014 and another one last July. The Philippines has also done so, including when it enacted its archipelagic baseline through the Republic Act 9522 in 2009, in which it reaffirmed claims over the Spratly Islands. It also refers to the Kalayaan Island Group and Scarborough Shoal. Vietnam made clarifications of its own when it transmitted a statement to the arbitration tribunal in December 2014, mentioning the Paracel Islands group and the Spratly Islands group, although further clarification would be helpful.

Brunei and Malaysia have been relatively silent with respect to clarifying their respective claims, possibly because their stakes are not as great as those of the other claimants. Unlike the other claimants, which claim features a far distance from their mainland, Brunei and Malaysia claim features that are within their continental shelf claim limits. Their interest in claiming ownership over the features is possibly only to secure their continental shelf resources. With the arbitration tribunal determining that none of the features in the South China Sea are entitled to an exclusive economic zone or continental shelf, Brunei’s and Malaysia’s interests are safe, because whoever owns the disputed features within their continental shelves will not have a competing continental shelf claim. To further align with UNCLOS, it is best for Brunei and Malaysia to denounce their claimant status, stick to the continental shelf claim and focus on delimiting the continental shelf.

Among other claimants, the Philippines has sent signals that it is ready to negotiate directly with China. In a joint statement issued during the visit of the newly elected President Rodrigo Duterte to Beijing last October, China and the Philippines agreed to create a new bilateral mechanism. Although the specific agenda of this new mechanism has not yet been outlined, solving the ownership disputes could be a possible option.

Take Scarborough Shoal as an example. As previously explained, it is only disputed between China and the Philippines. If they both set out to resolve the dispute, the main agenda of the bilateral mechanism would simply be to determine who owns the shoal. Both China and the Philippines would start by reiterating their arguments and explaining their historical records, which they have presented between themselves for years. If this is the route they take, the new bilateral mechanism will just become a repetition of decades of back and forth between China and the Philippines.

Without resolving the sovereignty issue it is unlikely that China and the Philippines would discuss the maritime delimitation between the disputed feature and other features or the mainland. It is unlikely that they would let go of their claims. Particularly for China, Scarborough Shoal will be a test case in defending its claims with regard to other features. Moreover, it should not be forgotten that the location of the shoal is very strategic for China; it is not as far away as the Spratly Islands, and it is very close to Luzon, the main island of the Philippines.

If the ownership talks become deadlocked, China and the Philippines possibly will explore a joint development option. China has repeatedly asserted this idea, including in a July 2016 position paper. In practice, joint development is commonly used for oil and gas resources. Arrangements for joint development can vary. It can take the form where one side will conduct the activities, but the profits will be shared. This model has been applied by Saudi Arabia and Bahrain, where Saudi Arabia manages the resources.

Another option is to establish a joint authority. Malaysia and Thailand have opted for this model. China and the Philippines must be aware that joint development could involve a lengthy process. In the case of Malaysia and Thailand, the commitment to joint development was initiated in 1979, but the agreement to create a joint authority was not put into place until 1990. Additionally, both Malaysia and Thailand had to go through internal processes before the joint development could operate, and it was not until 2005 that they first saw gas production.

Although China and the Philippines have the liberty to custom-make a joint development arrangement, they would first need to define the disputed area for joint development around Scarborough Shoal and identify the resources that can be managed together. The US Energy Information Administration once released a study that the area around Scarborough Shoal does not have high hydrocarbon potential. Whether or not this is true, China and the Philippines need to determine that the resources are worth the expense to set up a joint development framework. What does exist on the shoal, however, is guano – layers of bird droppings that can be sold as fertilizer.

From this perspective, it appears that Scarborough Shoal is more of a political token or a point of pride, as opposed to a tangible economic resource. Whether as a face-saving strategy or to overcome domestic demand, China and the Philippines might enter into a joint development arrangement even if it does not yield any significant economic benefit.   

The desire of Chinese President Xi Jinping and President Duterte to resolve the South China Sea dispute must be supported. In this case, it is important to note that no modern ownership disputes over islands or maritime features have ever been resolved through negotiations. In other parts of the world there are other island disputes yet to be resolved, such as the Machias Seal Island between Canada and the United States, the Falkland/Malvinas Islands dispute between Argentina and the United Kingdom, and the Liancourt Rocks between Japan and South Korea.

Southeast Asia can be a model. After decades of negotiations, regional states eventually agreed to settle their dispute through adjudication. Indonesia and Malaysia with regard to Ligitan and Sipadan; and Malaysia and Singapore regarding Pedra Branca, Middle Rocks and South Ledge, through the International Court of Justice. Now, the proverbial ball is with China and the Philippines.

Haryo Budi Nugroho is an Indonesian diplomat currently assigned to the Office of the Special Envoy to the President of Indonesia for Maritime Delimitation. This essay reflects his personal views.