[SCMP Column] Bargaining for advantage

July 18, 2016

Last week’s Financial Times blooper over the South China Sea dispute was a classic. The front page headline gleefully declared: “UN hands rebuke to Beijing over South China Sea territorial claims”.

In a single careless sub-editorial stroke, driven no doubt by a zealous enthusiasm to rub China’s nose in it, the FT both made a kindergarten mistake - and managed to infuriate both China and the UN.

A quick check in Wikipedia would have prevented the first gross error:  the Hague-based Permanent Court of Arbitration that was responsible for ruling on the Philippine complaint against China in the South China Sea “should not be confused with the International Court of Justice, which is the primary judicial branch of the United Nations, while the PCA is not a UN agency.” Ouch. What “UN rebuke”?
The second gross error was more subtle. Out of 15 complaints brought a year ago to the PCA by the Philippine government, the five-judge panel said it could rule on just seven – and it had no right to rule on sovereignty. It was thus silent on China’s territorial claims, whatever the slick pen of the FT sub-editor may have believed. The ruling was clear: “There is no legal basis for China to claim historic rights to resources within the sea areas falling within the “nine-dash line”.” (my emphasis in italics). The PCA was talking not about sovereignty, but about use of resources.

The FT blooper illustrates some important points: first, an awful lot of people are keen to dump on China. Second, almost none of us had ever heard about the Permanent Court of Arbitration until this week – and most confused it with the UN’s International Court of Justice, which shares the same grand Peace Palace premises in the Hague. Third, the real world is almost always immensely more messy and complicated than we journalists – or headline-writers – would like it to be.

Don’t get me wrong: this ruling was a huge and embarrassing diplomatic blow for China that will undoubtedly generate dangerous tensions across the South China Sea. But if you have patience to wade through the messy boring detail, a more complex story emerges which might, ironically, be quite encouraging.

The PCA has a weird and fascinating history. It was created in 1899 – yes, 117 years ago – by the first Hague convention, the first international agreement ever to try to reach agreement on the civilized management of war, and how to settle international conflicts peaceably. By the time of the second Hague Convention in 1907 the PCA was up and running, but by the time of the planned third Hague meeting – in 1914 – the world was at war and the mission of the Hague Conventions was in shreds. So much for its aim to discover unbloody solutions to international conflicts.

Unlike the International Court, which is funded by the UN, the PCA to this day earns its living on the fees paid by arguing parties, not unlike Hong Kong’s own Arbitration Centre. It is unclear who paid for its year-long South China Sea deliberations. Definitely the Chinese paid nothing since they objected to the process from the outset. If all costs were met by the Philippine Government, what can we say about the PCA’s independence?

However binding and unchallengeable the PCA’s rulings, it has no enforcement power – as a result of which almost none of its rulings over 117 years have ever been complied with.  China will join a very long queue of reprobates who have ignored its opinion. This includes the 1986 ruling against the United States in a dispute brought by Nicaragua. In truth, this was worse because it was a ruling by the UN’s International Court, not by the PCA, but in time-honoured tradition, the US ignored the unfavourable ruling and quietly dispensed funds from its large aid budget to placate the Nicaraguan government.

Interestingly, a core objection by the Chinese against the PCA’s relevance was the fact that it has no power to rule on sovereignty. From the outset, China insisted that the South China Sea conflicts were integrally linked with conflicting claims on sovereignty, making it impossible to disentangle arguments about use of resources from arguments about sovereignty. I must confess, I am inclined to agree with them – no matter how glacial the progress on grappling with the sovereignty issues.

One virtue of the Hague ruling is that it will almost certainly force China to clarify its elliptical claims linked to the nine-dash line. Steps have already been taken here. A 43-page white paper released by Beijing in the uproar following the ruling noted: “We firmly insist on maintaining peace and stability in the South China Sea, and on directly negotiating for a peaceful resolution on relevant disputes with states that are directly involved, based on the respect of history and in accordance with international laws.” In the present febrile atmosphere, the commitment to maintaining peace was important, as was the commitment to international law.

But other “hot-button” phrases were important too: “directly negotiating” with states that are “directly involved”. China is fuming at the firm but discrete hand of the US behind the Philippine case, not least because the US is lecturing all concerned to observe the UN Law of the Sea without itself ever having agreed to sign the treaty. Direct negotiations were kick-started back in 2002 between China and ASEAN with the Declaration of the Conduct of Parties in the South China Sea, but there has been little progress since then. China has at several points inflamed ASEAN governments with heavy-handed assertion of its claims.

Coincidentally and perhaps conveniently, Foreign Ministers from ASEAN and China meet later this week in Vientiane in Laos. Here is a perfect opportunity to calm the mood, and make some progress – not least for the Philippines’ newly-minted President Duterte. Surely he has been gifted a unique chance to break a log-jam, and to give his long-troubled country a significant boost. With the Hague ruling conveniently visible in his back pocket, he surely has leverage to make material progress and to harness significant investment flows from China to improve the country’s appalling infrastructure. The US could not possibly object, given its dishonourable 1986 deal with Nicaragua. This could be a defining moment as Duterte begins his six year term: a choice between constant and costly attritional conflict with China, or perhaps-transformative investment in the country’s neglected infrastructure. In the interests of the Philippines’ hard-pressed people, I know what choice I would make.
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