Hague ruling on China/Philippines South China Sea dispute due Tuesday

HONG KONG - The Permanent Court of Arbitration (PCA) in The Hague will on Tuesday announce its verdict on the South China Sea dispute between Philippines and China. China rejects the idea that the international court has jurisdiction over the dispute and has announced a military drill in the run-up to the decision, heralding an escalation of tensions in the coming months – even as the new President of Philippines displays more willingness to downplay the territorial dispute.

The Philippines argues that under the United Nations Convention on the Law of the Sea (UNCLOS), China’s claims to historic rights with respect to maritime areas of the South China Sea are unlawful because violate UNCLOS agreements.

A ruling in favour of the Philippines would encourage other nations who currently have overlapping claims with China to follow suit.

In an economic research note, BBVA Bank says China will argue that a ruling in favour of the Philippines would be a breach of sovereignty and will intensify the claims and militarisation efforts in the area, resulting in an escalation of tensions. In fact,

“China just announced a seven-day military drill off the Parcel Islands ahead of July 12 and has threatened to abandon UNCLOS, which would be destabilising for the region,” the note says. “Further, the most likely verdict will avoid antagonising China by including some compensation for the Spratly Islands.”

BBVA says the Philippines and China could explore bilateral channels. “In fact, President Duterte has vowed that his Administration will reverse President Aquino’s policy on the South China Sea while Beijing has stated that it is ready to start negotiations with the Philippines on South China Sea issues if Manila ignores the arbitration ruling.

As the Philippine economy is not dependent on exports to China (3% of GDP)”, Duterte would use this as an opportunity to attract Chinese investments to close the infrastructure gap.”  www.bbvaresearch.com (ATI).