Out-Law Analysis | 29 Jul 2016 | 2:45 pm | 2 min. read
The Permanent Court of Arbitration in The Hague ruled this month that there was no evidence China had historically exercised exclusive control over the waters or resources of the South China Sea. The ruling also stated that China had violated the Philippines’ sovereign rights, and caused 'severe harm to the coral reef environment' by building artificial islands.
The judgment was welcomed by the Philippines, but China immediately responded to say that it will not accept the Tribunal's ruling. There is now, at best, a stalemate, and confrontation which could potentially lead to rapid escalation in the region.
It is difficult to conceive how such competing interests can be reconciled, and compromise achieved, in a world where public international law is relatively powerless, but an approach based on economic benefit may offer a way forward. The mineral resources under the Sea are one of the main points of contention, so a Joint Development Area (JDA) could potentially be created to manage these equitably.
A JDA is a feature of international law that can be traced back to 1922 when Kuwait and Saudi Arabia established a 'neutral zone' in an area where both had laid territorial claims.
The concept is now enshrined in the United Nations Law of the Sea Convention which is the foundation of international law in this area. The convention has been signed by 167 states plus the European Union, and those signatories are encouraged to come up with 'provisional arrangements' specifically designed not to affect any eventual ruling on territory and sovereignty.
A typical JDA establishes a 'regime of joint jurisdiction, use or exploitation for zones of overlap'. The international 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.
A JDA has already been successfully put in place between Thailand and Malaysia, in the Malaysia-Thailand Joint Development Area. After lengthy negotiation, agreement was reached and the production shared.
The precedent may now be followed in the Overlapping Claims Area offshore Thailand and Myanmar. However, this is a much more fraught and politically charged relationship, and there has been little progress to date.
The Thailand-Myanmar dispute is probably a closer analogue to the South China Sea issue, which is made exponentially more complicated given the number of parties in dispute. The agreement would have to involve China, the Philippines, Vietnam, Taiwan, Malaysia and Brunei, all of whom have competing claims to the area.
Although it is tempting to dismiss ideas of cooperation as unrealistic, we should remember that it is always better to keep talking. To discuss the development and allocation of the more measurable reserves of oil and gas through a framework such as a JDA, rather than vague and emotionally-charged concepts of national sovereignty, would be a step in the right direction.
Singapore-based Ashley Wright is an oil and gas expert with Pinsent Masons, the law firm behind Out-Law.com.