Is the Philippines Arbitration Claim Against China “Bizarre” and “Futile”?

by Julian Ku

As this Voice of America report notes, the Philippine government is determined to forge ahead with its UNCLOS arbitration, even though China is refusing to participate in the arbitration. This seems to be a sensible strategy, at least from a legal point of view, because it is plainly within its legal rights to do so.

But would a one-party arbitration be futile?  The VOA quotes Prof. Myron Nordquist of UVA on this point:

But how would one-party arbitration work, exactly? Professor Myron Nordquist of the Center for Oceans Law and Policy at the University of Virginia calls the situation “quite bizarre.”

“For one thing, it is doomed to failure because if the party won’t consent to the arbitration there is then no enforcement,” said Nordquist. “How would they expect a country that didn’t want to have a dispute settled by third parties to feel in any sense bound by a decision where they didn’t even participate?”

I agree the situation is odd, but it is not unprecedented.  The Annex VII provisions clearly contemplate situations where one party refuses to appoint an arbitrator by giving the power to the President of ITLOS to appoint the rest of the tribunal.  Moreover, general international arbitral practice is to allow arbitrations to proceed even when one party (like China) boycotts the whole proceeding. (See Gary Born, International Commercial Arbitration, at 449-50). In such cases, the tribunal typically continues to give notice to the boycotting party, and will reach a reasoned award based on its own assessment of the law and facts. It does not typically simply accept the participating party’s submissions as true.

Moreover, I take issue with Professor Nordquist’s conclusion that the arbitration is “doomed to failure because if the party won’t consent to the arbitration there is then no enforcement.”  His statement embeds a variety of (understandable) misunderstandings about the nature of Annex VII arbitration.

First of all, let’s be clear.  China has already consented to Annex VII arbitration, at least with respect to allowing a tribunal to be constituted and to determine whether it has jurisdiction in a dispute. China consented when it acceded to UNCLOS. All China has done so far is refuse to appoint an arbitrator.

Second, as any private international commercial arbitrator could tell you, consent to an arbitration does not in any way guarantee enforcement.  Indeed, in private commercial arbitrations, judicial enforcement proceedings are common and necessary to force parties to comply with arbitral awards.

To put this another way, if China had participated in the arbitration by appointing an arbitrator, I don’t think it would have affected its likelihood of complying with any arbitral award.  UNCLOS does not have any sanctions regime akin to, say the Dispute Settlement Understanding of the WTO, so China would not face any formal sanctions if it failed to comply with an arbitral award.

All of this is a long way of saying, the decision by the Philippines to continue with the arbitration (sans China) is not really any more futile than if China had fully participated.  In both situations, China would likely not have complied  with any unfavorable award.  Any award is only going to be useful to rally other countries to the Philippines’ side as well as in marshaling global public opinion to its cause (as Prof. Nordquist does note).  Indeed, it seems that the Philippines’ American lawyer is banking on the negative reputational effects of this case eventually pushing China to come around to participate in the arbitration. (FWIW, I am skeptical that the Chinese government can be manipulated this way, especially since domestic public opinion in China leans in the opposite direction.)

For this to work, though, the Philippines has got to try to educate the global media more effectively. Headlines from USA Today, for instance, describing China as rejecting “UN Mediation” only make things murkier for them.  China is going to play the “we-just-want-to-negotiate-unlike-you-troublesome-Filipinos” card.  The Philippines needs to play the “we-are-just-asking-for-the-arbitration-that-you-consented-to” card.  So far, they are not doing all that well.

Goodbye UNCLOS Dispute Settlement? China Walks Away from UNCLOS Arbitration with the Philippines

by Julian Ku

Breaking news:  China has rejected arbitration under Annex VII of the UN Convention on the Law of the Sea with the Philippines, dealing a heavy blow to the future of dispute settlement under UNCLOS (h/t China Law Prof Blog).  According to this China Daily report,

“Chinese Ambassador to the Philippines Ma Keqing had an appointment with officials from the Philippines’ Foreign Ministry on Tuesday and returned a note and related notice after expressing China’s rejection,” spokesman Hong Lei said at a daily press briefing.

“The note and related notice not only violate the consensus enshrined in the Declaration on the Conduct of Parties in the South China Sea (DOC), but are also factually flawed and contain false accusations,” Hong said.

As I have noted here (and as Prof. Clarke notes as well), the Philippines is now within its rights to ask the President of the International Tribunal for the Law of the Sea to appoint all four remaining arbitrators for the Annex VII tribunal.  Once the President of ITLOS has done so, the duly constituted arbitral tribunal may act even without China’s participation.

Upon reflection, I am not really surprised China has decided to walk away from the Annex VII tribunal.  As I noted earlier, such tribunals have tended to combine their considerations of jurisdiction with those of the merits.  They have not generally bifurcated their proceedings, nor do they seem to have any obligation to do so.

This is a problem for China because while their jurisdictional challenge is pretty strong, their argument on the merits is undeveloped and fuzzy.  They have never exactly spelled out what they mean by having “indisputable sovereignty” over the South China Sea.   Do they mean it is a territorial sea? Or that they have general economic rights similar to an Exclusive Economic Zone?

So I am not shocked that China is walking away here. The question for the Philipppines is: what next? Do they continue with the Annex VII arbitration without China? Well, their DFA seems ready to move forward without China.  But would any award issued by this tribunal be pretty meaningless?

I’m not sure. I think that any award there would have little impact on China, but it should be useful in helping rally allies in Southeast Asia, especially within ASEAN.  It is not going to stop China much, but an award that undermines the legality of China’s claims is certainly better to have than not to have. But it is not nearly as much as it would have been if China had played ball (and lost).

China’s statement contains a curious and hard to understand argument.  According to the Chinese foreign ministry, the Philippines arbitration claim “complicates” resolution of conflicts in the South China Sea in violation of the Declaration on Parties’ Conduct in the South China Sea.    Presumably, China is referring to Article 5 of the Declaration:

5. The Parties undertake to exercise self-restraint in the conduct of activities that would complicate or escalate disputes and affect peace and stability including, among others, refraining from action of inhabiting on the presently uninhabited islands, reefs, shoals, cays, and other features and to handle their differences in a constructive manner.

Does making an arbitration claim under Annex VII “complicate or escalate disputes”?  Given the whole context of Paragraph 5, I am highly doubtful of this argument. One must also note that the previous paragraph instructs all parties to

undertake to resolve their territorial and jurisdictional disputes by peaceful means, without resorting to the threat or use of force, through friendly consultations and negotiations by sovereign states directly concerned, in accordance with universally recognized principles of international law, including the 1982 UN Convention on the Law of the Sea;

The explicit reference to UNCLOS (albeit the 1982 version) doesn’t really add much weight to the claim that the the Declaration somehow prohibits parties from resorting to UNCLOS arbitration.  If anything, it goes the other way.  Given that the Declaration is not technically binding under international law anyway, let’s just say this is the weakest of a series of weak arguments trotted out by China in this dispute.

So let’s just call this what it is: China is thumbing its nose at UNCLOS and it has now dealt a  serious, near fatal blow, to the UNCLOS dispute settlement system, at least in its ability to resolve serious disputes involving major powers.  UNCLOS arbitration is not going to restrain China in any significant way. At least, China doesn’t think it will pay any serious costs to walking away, which is why it is willing to accept the equivalent of a default judgment.

From the perspective of the United States, the China-Philippines episode is a cautionary tale. On the one hand, it suggests that those critics of UNCLOS worried about the impact of Annex VII arbitration tribunals need not fear them all that much.  On the other hand, this episode should put an end to the always silly argument that the US needed to join UNCLOS in order to use UNCLOS against China.  That was never really going to work, and we now have ample evidence.

So, How Does the Chinese Press Feel About the UNCLOS Arbitration?

by Julian Ku

W020130124366690332002For those of you wondering how seriously the Chinese media is taking the Philippines’ arbitration claim against China over the South China Sea (there must be at least two of you out there), here is an illustrative cartoon from a Chinese newspaper, “JingChu Times”, in Central China (although originally from another publication).

Although one doesn’t need to read Chinese to get the jist, here is my attempt to translate anyway.

The Foot is labeled: “Chinese Territory”

The Fish biting the Foot’s toe is labeled: “The Philippines”.  The Fish is holding a sign with the words: “Mine!”.

Yes, this Annex VII UNCLOS arbitration claim is really sending shock waves throughout China.

What Happens if China Tries to Boycott UNCLOS Arbitration? A Japanese Guy Gets to Appoint the Tribunal

by Julian Ku

[I know that what this blog needs is yet another post on the China-Philippines UNCLOS Arbitration! We aim to please!]

Steve Groves of Heritage asks in the comments to my prior post: What happens if China simply refuses to show up at the arbitration? Can an arbitral tribunal even be formed to rule on jurisdiction?

This is something that I’ve wondered too, and then I realized Annex VII of UNCLOS appears to settle this issue as well.  The key provision is Article 3 of Annex VII. Under Art. 3(b), the initiating party appoints an arbitrator, which the Philippines has already done.  Then,

(c) The other party to the dispute shall, within 30 days of receipt of the notification referred to in article l of this Annex, appoint one member to be chosen preferably from the list, who may be its national. If the appointment is not made within that period, the party instituting the proceedings may, within two weeks of the expiration of that period, request that the appointment be made in accordance with subparagraph (e).

(Emphasis added.).  Turning to Subparagraph (e):

(e) Unless the parties agree that any appointment under subparagraphs (c) and (d) be made by a person or a third State chosen by the parties, the President of the International Tribunal for the Law of the Sea shall make the necessary appointments.

(Emphasis added). Essentially, this means the President of ITLOS can fill out the rest of the arbitral tribunal if China tries to boycott, by appointing the remaining four members.  As Craig Allen of the University of Washington pointed out to me in an email, the current President of ITLOS is Shunji Yanai, a well-respected diplomat and jurist.  That is to say, a well-respected Japanese diplomat and jurist.  I’ve met President Yanai briefly, and he is a very smart and well-accomplished guy.  But Japan is just not on China’s BFF list right now.  China’s Weibo Internet commenters might well just blow up if this happens.

Professor Allen suggests that the President of ITLOS might, before appointing arbitrators, consider the jurisdictional objection and refuse to appoint a tribunal. I think this is a plausible, but not the most natural reading of Annex VII, Art. 3.  Professor Allen also raises a good point: China’s best friend here might well be the United States, which has a strong interest in seeing an expansive reading of the Article 298 exemptions.

In any event, the few Annex VII arbitral tribunals that have been constituted have generally not hesitated to rule on their own jurisdiction.  See Barbados v. Trinidad, or Guyana v. Suriname. (For a full list, see here).  Even worse from China’s perspective, these Annex VII arbitral tribunals issued their jurisdictional decision at the same time as they issued the award on the merits.  They don’t have to do so, and they can bifurcate the proceedings to address jurisdiction first.  But they don’t have to.

Would one of the journalists forced to sit through Chinese Ministry of Foreign Affairs press briefings please ask the spokesman to address the arbitral tribunal question?  Or at least, ask them again? Will China play the arbitral tribunal game and appoint someone by February 21?  Or will they let President Yanai appoint the tribunal for them?   The 30-day clock is running.

Has China Rejected the Philippines Arbitration Already? Not yet.

by Julian Ku

This article from the Global Times, a hawkish state-controlled newspaper in China, probably reflects a little bit of the official Chinese view on the Philippines UNCLOS claim. It also contains this troubling bit of analysis, from a Chinese scholar:

The international court would not take the case without agreements from all parties involved, Dong Manyuan, a researcher at the China Institute of International Studies, told the Global Times.

Uh, yes, that’s true in a general sense.  But China has already agreed to allow an Article 287 arbitral tribunal to take this case and at least to determine jurisdiction. Article 288(4) would seem to be the last word on this point.

4. In the event of a dispute as to whether a court or tribunal has jurisdiction, the matter shall be settled by decision of that court or tribunal.

Sorry, Global Times! China is stuck with this case, at least as a legal matter, and at least through the jurisdictional phase. I hope the Chinese government is getting better legal advice than this. China could boycott the arbitration, but they would be in a clear violation of Article 287 and Article 288 of UNCLOS.  Will it dare to do so?

Will China Participate in the UNCLOS Arbitration with the Philippines?

by Julian Ku

China’s initial reaction to the Philippines’ decision yesterday to file an arbitration claim has been to stick to its guns.  From the BBC:

On Wednesday, Chinese foreign ministry spokesman Hong Lei told journalists that China has “indisputable sovereignty over the South China Sea islands and adjacent waters, which has abundant historical and legal grounds”.

“The key and root of the dispute over the South China Sea between China and the Philippines is territorial disputes caused by the Philippines’ illegal occupation of some of the Chinese islets and atolls of the Spratly Islands,” he said.

He said China had been “consistently working towards resolving the disputes through dialogue and negotiations to defend Sino-Philippine relations and regional peace and stability”.

Some observers, quoted here by the VOA, have suggested that China will simply not participate in the UNCLOS arbitration.  I think this makes sense from a strategic perspective, but it is hard to understand how that would work from a legal perspective.

As a legal matter, China has an obligation to participate in the UNCLOS arbitration by selecting an arbitrator, and then a schedule for the proceedings.  It will then file a challenge to the UNCLOS arbitration tribunal’s jurisdiction (an argument I believe it has a good chance to win).  If China simply doesn’t show up, then it would be in clear violation of its UNCLOS obligations.

China has an interesting choice here. It could participate in the arbitration, and if it loses on jurisdiction, simply withdraw and declare that it won’t abide by the tribunal’s decision.  Or it could litigate to the merits, and then if it loses, simply refuse to comply with the arbitral tribunal’s award.

None of these potential arbitral results are really all that attractive, from China’s perspective. But defaulting on the arbitration is not all that attractive either.  What China does here will tell us a lot about China’s commitment to its strategic goal of controlling the South China Sea, as well as its level of commitment to UNCLOS and international dispute resolution.

Game Changer? Philippines Seeks UNCLOS Arbitration with China Over the South China Sea

by Julian Ku

In a potentially huge development, the Government of the Philippines announced earlier today that it has filed for arbitration with China under the UN Convention for the Law of the Sea. The Philippines’ claim places China’s controversial sovereignty claim over the South China Sea (see right) squarely before an international arbitral tribunal convened under Article 287 of UNCLOS.  According to the Philippines Foreign Minister, here are the main claims:

  1. The Philippines asserts that China’s so-called nine-dash line claim that encompasses virtually the entire South China Sea/West Philippine Sea is contrary to UNCLOS and thus unlawful.
  2. Within the maritime area encompassed by the 9-dash line, China has also laid claim to, occupied and built structures on certain submerged banks, reefs and low tide elevations that do not qualify as islands under UNCLOS, but are parts of the Philippine continental shelf, or the international seabed.
  3. In addition, China has occupied certain small, uninhabitable coral projections that are barely above water at high tide, and which are “rocks” under Article 121 (3) of UNCLOS.China has interfered with the lawful exercise by the Philippines of its rights within its legitimate maritime zones, as well as to the aforementioned features and their surrounding waters.
  4. The Philippines is conscious of China’s Declaration of August 25, 2006 under Article 298 of UNCLOS (regarding optional exceptions to the compulsory proceedings), and has avoided raising subjects or making claims that China has, by virtue of that Declaration, excluded from arbitral jurisdiction.

Some early thoughts.  As I argued here, I still think the Philippines has a massive jurisdictional problem because of China’s Article 298 declaration excludes the following certain subjects from this kind of arbitration.

(a)(i) disputes concerning the interpretation or application of articles 15, 74 and 83 relating to sea boundary delimitations, or those involving historic bays or titles….

China is claiming (at least it has often seemed to be claiming) that it has complete sovereignty over the South China Sea (per the map above). I take the Philippines is arguing that China’s South China Sea claim is not really a “sea boundary  delimitation” within the meaning of Article 15.  Nor is the Chinese SCS claim about “historic bays” and “titles”.  I don’t think that the Philippines has a hopeless case, but I do think they will face a huge challenge to get any arbitral tribunal to assert jurisdiction here, especially since one judge will be appointed by China.

On the plus side, if the Philippines manages to get past the jurisdictional hurdle, it seems to me that they have a very good chance of prevailing since China’s claim is hard to square with the rest of UNCLOS.  Moreover, they force China to go on the defensive here without actually threatening China in any military or economic way.

Strategically, I think I understand why the Philippines has filed this claim. They have very little leverage with China: economically, politically, or militarily.  In this forum, the worst case scenario is the Philippines will lose on jurisdiction. This shouldn’t affect the merits of their claims, though.  For China, the worst case scenario is that it loses on the merits and would have to face the decision of whether to comply with the tribunal.  If they lose, I can see China simply withdrawing from UNCLOS.

In any event, I think it is safe to say this it a game changer in the long-running South China Sea dispute.  It is also, without question, the most important case that has ever been filed under the dispute resolution procedures of UNCLOS.  It will be a crucial test of the UNCLOS institutions, as well as of UNCLOS members.  I am skeptical that China will allow itself to be drawn into serious international adjudication (see my argument here), but it will be fascinating to see how China reacts.