JOUSTING MATCH BETWEEN A BICYCLE AND A SPEEDING BUS: Can The Philippines Enforce The PCA Arbitration Ruling Against China? By: Adrian Avilado Antazo, MBA

“Our improved relationship with China, however, does not mean that we will waver in our commitment to defend our interests in the West Philippine Sea.” – President Rodrigo Roa Duterte, State Of the Nation Address 2018.1

Overview of the Permanent Court of Arbitration

The Convention for the Pacific Settlement of International Disputes at The Hague in 1899 during the first Hague Peace Conference gave birth to the Permanent Court of Arbitration. Czar Nicolas II of Russia initiated the convention of the Conference “with the object of seeking the most objective means of ensuring to all peoples the benefits of a real and lasting peace, and above all, of limiting the progressive development of existing armaments.”

The Permanent Court of Arbitration was formally established in accordance to Article 20 of the 1899 Convention, stating:

“With the object of facilitating an immediate recourse to arbitration for international differences which it has not been possible to settle by diplomacy, the signatory Powers undertake to organize a Permanent Court of Arbitration, accessible at all times and operating, unless otherwise stipulated by the parties, in accordance with the rules of procedure inserted in the present Convention.”

At the second Hague Peace Conference in 1907, the 1899 Convention was revised. Today the Permanent Court of Arbitration provides services for the resolution of disputes involving various combinations of states, state entities, intergovernmental organizations, and private parties.2 The Permanent Court of Arbitration provides administrative support in international arbitrations involving various combinations of states, state entities, international organizations and private parties. The Permanent Court of Arbitration’s functions are not limited to arbitration and also include providing support in other forms of peaceful resolution of international disputes, including mediation, conciliation, and other forms of alternative dispute resolution.3

The United Nations Convention on the Law of the Sea

In November 16, 1994, The 1982 United Nations Convention on the Law of the Sea (UNCLOS), came into force. It is an international treaty that provides a regulatory framework for the use of the world’s seas and oceans, inter alia, to ensure the conservation and equitable usage of resources and the marine environment and to ensure the protection and preservation of the living resources of the sea. UNCLOS also addresses such other matters as sovereignty, rights of usage in maritime zones, and navigational rights. 166 States have ratified, acceded to, or succeeded to, UNCLOS as of January 10 2014.4

Arbitration is the default means of dispute settlement5 if a State has not expressed any preference with respect to the means of dispute resolution availability. If the parties have not accepted the same procedure for the settlement of the dispute, arbitration under Annex VII is the default means of dispute settlement subject to same exceptions or reservations pursuant to Article 298.6

The South China Sea/West Philippine Sea Arbitration (The Republic of Philippines v. The People’s Republic of China)

The Republic of the Philippines On 22 January 2013, instituted arbitral proceedings against the People’s Republic of China under Annex VII to the United Nations Convention on the Law of the Sea (the “Convention”). The arbitration concerned the role of historic rights and the source of maritime entitlements in the South China Sea, the status of certain maritime features in the South China Sea, and the lawfulness of certain actions by China in the South China Sea that the Philippines alleged to be in violation of the Convention. The Philippines appointed Solicitor General Jose. C. Calida replacing Solicitor General Florin T. Hilbay as of 30 June 2016, who replaced Solicitor General Francis H. Jardeleza, as of 2 March 2015. However, China adopted a position of non-acceptance and non-participation in the proceedings. China did not appoint an agent. In a Note Verbale to the PCA on 1 August 2013, and throughout the arbitration proceedings, China reiterated “its position that it does not accept the arbitration initiated by the Philippines.” The Permanent Court of Arbitration served as Registry in this arbitration.7
The Permanent Court of Arbitration found China has breached its obligations pursuant to Articles 279, 296, and 300 of the Convention, as well as pursuant to general international law, to abstain from any measure capable of exercising a prejudicial effect in regard to the execution of the decisions to be given and in general, not to allow any step of any kind to be taken which might aggravate or extend the dispute during such time as dispute resolution proceedings were ongoing.8

Enforceability of the Award of the Permanent Court of Arbitration

Enforceability of an International Treaty

United Nations Convention on the Law of the Sea is an international treaty that provides a regulatory framework for the use of the world’s seas and oceans, inter alia, to ensure the conservation and equitable usage of resources and the marine environment and to ensure the protection and preservation of the living resources of the sea. It addresses such other matters as sovereignty, rights of usage in maritime zones, and navigational rights.

Treaty is an international agreement concluded between States in written form and governed by international law, whether embodied in a single instrument or in two or more instruments and weather its particular designation. It is an agreement between States, including international organizations of States, intended to create legal rights and obligations of the parties thereto. It is the ubiquitous instrument through which all kinds of International transactions are conducted. It is the closest analogy to legislation that international law has to offer.9

A treaty may have incorporated enforcement provisions; however, some treaties may not expressly include such enforcement mechanisms including the United Nations Convention on the Law of the Sea, no punitive action was incorporated and the only means to call out any breach in the obligation of the treaty is through arbitration of disputes or referral to the ICJ. In an international system where there is no overarching authoritative enforcer, punishment for non-compliance functions differently. States are more likely to fear tactics used by other states, such as reciprocity, collective action, and shaming.10

Reciprocity is a type of enforcement by which states are assured that if they offend another state, the other state will respond by returning the same behavior. Guarantees of reciprocal reactions encourage states to think twice about which of their actions they would like imposed upon them.

Collective Action is the act of several states joining together against one state to produce what is usually a punitive result. During the 1990, Iraq invasion of Kuwait, it was opposed by most states, and they organized through the United Nations to condemn it and to initiate joint military action to remove Iraq. The United Nations may also imposed joint economic sanctions, such as restrictions on trade, on South Africa in the 1980s to force that country to end the practice of racial segregation known as apartheid.

Shaming or also known as the “name and shame” approach. Most states find it objectionable negative publicity and will actively try to keep away from it, so the threat of shaming a state with public statements regarding their offending behavior is often an effective enforcement mechanism. This method is particularly effective in the field of human rights where states, not wanting to intervene directly into the domestic affairs of another state, may use media attention to highlight violations of international law. In turn, negative public attention may serve as a catalyst to having an international organization address the issue; it may align international grassroots movements on an issue; or it may give a state the political will needed from its populace to authorize further action.

Effect of the Treaty Enforcement Mechanism to China

Reciprocity Sanction

Based on the Reciprocity Sanction that the Philippines my use to enforce the award of the Permanent Court of Arbitration, let us look into three major Philippine-China relationship such as Trade, Investment, and Governmental Loan, sand test if the sanctions imposed by the Philippines to China will have adverse impact on the later or vice versa.

Trade Relationship

In 2015, the Philippines and China reached US$ 17.646 billion worth of bilateral trade. This comprises of US$ 6.175 billion worth of Philippine exports and US$ 11.471 billion in Philippine imports from China in 2015.11 In other sources, The Philippines is only the 38th largest export economy in the world. In 2016, the Philippines exported US$ 78 billion and imported US$ 92.9 billion, resulting in a negative trade balance of US$ 14.9 billion in 2016 which the top export destinations of the Philippines is China US$ 15 billion and the top import origins came from China US$ 19 billion.12 When we enforce trade sanction against China, our economic managers have to find new countries willing to received our US$ 15 billion worth of exports composed of 37% Integrated Circuits, 16% Computers, 5% Semiconductors and etc., and find countries that will supply our US$ 19 billion worth of imports such as Machines, Metals, Petroleum Products, Fabrics, Chemicals and etc.13

While China, the largest export economy in the world, in 2016, China exported US$ 2.27 Trillion and imported US$ 1.23 Trillion, resulting in a positive trade balance of US$ 1.04 Trillion.14

The trade import ratio of the Philippine to China versus the country’s overall import is 20% and the export is 19.2%. While the trade import ratio of China to the Philippines versus China’s overall trade is a measly 1.22% and the export is a microscopic 0.84%.

Based on the figures above, we can observe that if the Philippines impose a trade sanction to China, our sanction will be negligible and would not even graze the economy of China. But, when the China reciprocates the sanction in our country, one-fifth of our economy will crumble down with the said sanction. Therefore, the Philippines imposing sanction to China is not a viable option as it is considered a economic suicidal attempt to enforce the Permanent Court of Arbitration award.

Collective Action

In enforcing the ruling of the Permanent Court of Arbitration, the Philippines may seek help to the United States of America and the North Atlantic Treaty Organization to demand China to abide with the ruling. The Philippines may also appeal to the United Nation Security Council and demand assistance in defending our territory against the invasion of China in the West Philippine Sea. But this option faces a very difficult blockage.

United States of America and the Debt Tamer of China

The United States of America debt to China is US$ 1.17 trillion as of August 2018. That is 19 percent of the US$ 6.3 trillion in Treasury bills, notes, and bonds held by foreign countries. The rest of the US$ 21 trillion national debt is owned by either the American people or by the U.S. government itself. China holds the greatest amount of U.S. debt by a foreign country. Japan comes second at $1.03 trillion, followed by Brazil and Ireland at around $315 billion each. In November 2013, China held $1.3 trillion in U.S. debt. China reduced its holdings between then and 2017 to allow its currency, the Yuan, to rise. To do that, China had to loosen its peg to the dollar. That made the Yuan more attractive to Foreign Exchange traders in global markets.15
With the Debt of the United States of America, its foreign policy is restricted. Any move or aggression from United States which is contrary to the Foreign policy of China may have serious implications affect the financial ties of the United States and China. Currently, United States of America is at the debt leash of China.

The United Nation Security Council and China’s Game Plan

The Security Council has primary responsibility for the maintenance of international peace and security. It has 15 Members, and each Member has one vote. Under the Charter, all Member States are obligated to comply with Council decisions. The Security Council takes the lead in determining the existence of a threat to the peace or act of aggression. It calls upon the parties to a dispute to settle it by peaceful means and recommends methods of adjustment or terms of settlement. In some cases, the Security Council can resort to imposing sanctions or even authorize the use of force to maintain or restore international peace and security.16

Among the 15 Member State of the Security Council, 5 are the Permanent Members composed of United States of America, France, United Kingdom, Russian Federation and China. Impeding China as an aggressor in the case of the West Philippine Sea and demanding its compliance to the Permanent Court of Arbitration rule is a Non-procedural matter which must be decided by the concurrence of at least nine members, including all the permanent members of the Security Council. Let us say that nine out of the 15 members of the Security Council voted that indeed China violated the peace and security in the West Philippine Sea, the nine affirmative members must include the concurrence of all the Permanent Members including China. Decisions are to be made by an affirmative vote of nine (of the fifteen) members including the concurring votes of the permanent members. This regulation is moderated in that parties to a dispute must abstain from voting on decisions falling under the specifications of Chapter VI of the Pacific Settlement of Disputes. The question is will China indict itself?

The logical move that China can do to protect its interest is to Veto any resolution indicting them in the said violation of the Peace and Security in the West Philippine Sea. The regulation is moderated which China, a party to the dispute must abstain from voting on decisions falling under the specifications of Chapter VI Pacific Settlement of Dispute18. China, however, in a very logical act to protect its interest, may use the veto as a tool of power politics when its interests are at stake. To make matters worse, the China can veto the determination of an issue as either a “dispute” or a mere “situation” according to arbitrary regulations made after the San Francisco Conference19. Thus, the permanent members have a so-called “double” veto power on the meta-level that decides the preliminary question of whether or not a certain matter is subject to the veto. China can therefore fully protect their interests. Therefore, It will be a stalemate. The Security Council cannot and will not have the authority to intervene against China’s action in the West Philippine Sea.

Name and Shame Approach
China, the largest export economy in the world, in 2016, China exported US$ 2.27 Trillion and imported US$ 1.23 Trillion, resulting in a positive trade balance of US$ 1.04 Trillion. Can the rest of the world not patronize and refuse to accept Chinese 2.27 Trillion US Dollar worth of imports? Can the world allow the loss of opportunity to earn 1.04 Trillion US Dollar worth of exports to China? Can the world survive without or duplicate in a short period of time the cheap-labor-mass-manufacturing power and capabilities of China? Can the world boycott each and every product from China? Can the other super-powers of the World Name-Shame China who lends them money to fund their Government Expenditures, and introduce investment to their countries to boost their economies? And finally, will can the World Name-shame China, who consists of 18% percent of the world’s Population, and owns 64.123 Trillion US Dollar worth of Fixed Asset worldwide.20 A countries who will Name-shaming China, will face only two scenarios. First, If the country already have these assets, they will lose it, because China will not hesitate to pull out its Investment. Second, if the country yet does not have such investment, they will lose the opportunity to have the said investment. Meanwhile, Countries who opt not to involve themselves in the West Philippine Sea issue will either have a stable Chinese Investment relationship, or will have the opportunity to receive some piece of the Chinese Investment pie. Therefore, No country, even the Philippines, will try to Name-Shame China, and cut diplomatic, financial, and Economic ties. This act is considered an economic suicide.

Can we enforce the Permanent Court of Arbitration Rule with China?

As of this moment, No, The Philippines has no capacity to push back China in the West Philippine Sea. Until we have the economy capable to absorb the economic retaliation of China, we cannot demand, we can only strengthen our ties; we can only use diplomacy, and friendly means, and kindly ask China to recognize our rights in the West Philippine Sea. We cannot afford to cut ties with China, 20% of our economy, Direct Foreign Investments, and Governmental Debts are intertwined with Chinese economy. We do not have the fire power and the muscle to scare of China in the West Philippine Sea. We cannot rely on our greatest ally, the United States of America, to defend us and our sovereignty as they themselves have intertwined ties and issues with China; and they are currently being silenced by their debt with China and do not want the latter to pull out any financial assistance. Without the United States of America, we cannot also rely with NATO. Even if we raise this issue with the United Nation Security Council, their hands are technically tied to intervene. But not all is in despair; we can hope that the Plan for Asian Integration just like the European Union, will give us more leverage to assert our right in the West Philippine Sea. That the Code of Conduct in the South China Sea that President Rodrigo Roa Duterte is pushing for in the Association of South East Asian Nation including China, will give use the elbow room to use the resources in the said seas. I hope that with Globalization and Integration of the Asian Economy, our Representatives in the Legislature, Congress and our people will have an open mind in amending our Constitution to conform with the concept of Confederated Block of Countries with one economic and monetary system which is the goal of the Asian Integration, mimicking the Economic Success of the United States of America and the European Union, and learning the wisdom of their failure. Because any aggressive attempts of the Philippines to fight China head on is like a three year old kid on a bicycle trying to win in a jousting match against a speeding bus. It is a suicidal mission with no chance of success.

Footnote:

1. Full Text: Duterte’s 2018 Sona Speech, Unlisted -https://www.philstar.com/headlines/2018/07/23/1836195/full-text-dutertes-2018-sona-speech
2. History, Permanent Court of Arbitration, https://pca-cpa.org/en/about/introduction/history/
3. Services, Permanent Court of Arbitration, https://pca-cpa.org/en/services/
4. under Pursuant to Article 287(3) of UNCLOS, Annex VII
5. under Article 287(1) of UNCLOS (and has not expressed any reservation or optional exceptions pursuant to Article 298 of UNCLOS
6. Likewise, pursuant to Article 287(5) of UNCLOS
7. The South China Sea Arbitration (the Republic Of Philippines V. The People’s Republic Of China), Case Number 2013-19, https://pca-cpa.org/en/cases/7/
8. Award, The South China Sea Arbitration (the Republic Of Philippines V. The People’s Republic Of China), Case Number 2013-19,https://pcacases.com/web/sendAttach/2086
9. Nachura, A. E. (2017). Outline introduction topublic international law (1st ed., Ser. 2017). Manila: Rex Books store.
10. How Is International Law Enforced?, http://www.globalization101.org/how-is-international-law-enforced/
11. The Philippines’ Economic and Political Relations With China, https://www.aseanbriefing.com/news/2017/04/10/philippines-economic-political-relations-china.html
12. Philippines, https://atlas.media.mit.edu/en/profile/country/phl/
13. Products That China Exports To the Philippines (2016), https://atlas.media.mit.edu/en/visualize/tree_map/hs92/export/chn/phl/show/2016/
14. China, https://atlas.media.mit.edu/en/profile/country/chn/
15. Kimberly Amadeo, How Much Does the Us Owe China?, https://www.thebalance.com/u-s-debt-to-china-how-much-does-it-own-3306355
16. Security Council, Sc, Unsc, Security, Peace, Sanctions, Veto, Resolution, President, United Nations, Un, Peacekeeping, Peacebuilding, Conflict Resolution, Prevention, http://www.un.org/en/sc/
17. Nachura, A. E. (2017). Outline introduction topublic international law (1st ed., Ser. 2017). Manila: Rex Books store.
18. Pacific Settlement of Dispute, http://www.un.org/en/sections/un-charter/chapter-vi/index.html
19. 1945: The San Francisco Conference, http://www.un.org/en/sections/history-united-nations-charter/1945-san-francisco-conference/
20. China’s Fixed Asset Worldwide, https://www.statista.com/statistics/280527/total-investment-in-fixed-assets/

The Republic of Philippines v. The People’s Republic of China