OCTOBER 2018

Defusing the South

China Sea Disputes
A REGIONAL BLUEPRINT

A Report of the
CSIS EXPERT WORKING GROUP ON THE SOUTH CHINA SEA
OCTOBER 2018

Defusing the
South China Sea Disputes
A REGIONAL BLUEPRINT

A REPORT OF THE CSIS EXPERT WORKING GROUP ON THE SOUTH CHINA SEA
About CSIS
For over 50 years, the Center for Strategic and International Studies (CSIS) has worked
to develop solutions to the world’s greatest policy challenges. Today, CSIS scholars are
providing strategic insights and bipartisan policy solutions to help decisionmakers chart a
course toward a better world.

CSIS is a nonprofit organization headquartered in Washington, D.C. The Center’s 220

full-time staff and large network of affiliated scholars conduct research and analysis and
develop policy initiatives that look into the future and anticipate change.

Founded at the height of the Cold War by David M. Abshire and Admiral Arleigh Burke,
CSIS was dedicated to finding ways to sustain American prominence and prosperity as a
force for good in the world. Since 1962, CSIS has become one of the world’s preeminent
international institutions focused on defense and security; regional stability; and
transnational challenges ranging from energy and climate to global health and economic
integration.

Thomas J. Pritzker was named chairman of the CSIS Board of Trustees in November 2015.
Former U.S. deputy secretary of defense John J. Hamre has served as the Center’s president
and chief executive officer since 2000.

CSIS does not take specific policy positions; accordingly, all views expressed herein should
be understood to be solely those of the author(s).

© 2018 by the Center for Strategic and International Studies. All rights reserved.

IV | Defusing the South China Sea Disputes: A Regional Blueprint

Acknowledgments
This report was made possible by general funding to the CSIS Asia Maritime Transpar-
ency Initiative.

The members of the CSIS Expert Working Group on the South China Sea would like to
thank research associates Conor Cronin and William Colson for their editorial, ad-
ministrative, and logistical support, and research interns Charlotte Adams, Michele
Choy, Michael Coyne, Serena Doan, Pierre Geis, Amelia Lachter, Zhenling Lai, Harrison
Prétat, and Kevin Princic who assisted at various stages of the project.

Special thanks go to the staff of the Andreas C. Dracopoulos iDeas Lab at CSIS for their assis-
tance with the maps and graphics that appear in this report, and with its publication.

V | Defusing the South China Sea Disputes: A Regional Blueprint

Members of the Expert Working Group
Jay Batongbacal, University of the Philippines

Zack Cooper, American Enterprise Institute

Tara Davenport, National University of Singapore

Donald Emmerson, Stanford University

Matthew Funaiole, Center for Strategic and International Studies

Bonnie Glaser, Center for Strategic and International Studies

Michael Green, Center for Strategic and International Studies

Brian Harding, Center for Strategic and International Studies

Bill Hayton, Chatham House

Murray Hiebert, Center for Strategic and International Studies

Christopher Johnson, Center for Strategic and International Studies

Isaac Kardon, U.S. Naval War College

Carmen Ablan Lagman, De La Salle University

Evan Laksmana, Centre for Strategic and International Studies, Indonesia

Joseph Chinyong Liow, S. Rajaratnam School of International Studies

RADM (Ret.) Michael McDevitt, Center for Naval Analyses

John McManus, University of Miami

Elina Noor, Asia-Pacific Center for Security Studies

Prashanth Parameswaran, The Diplomat

Gregory Poling, Center for Strategic and International Studies

Clive Schofield, World Maritime University

Amy Searight, Center for Strategic and International Studies

Rashid Sumaila, University of British Columbia

Vo Si Tuan, Vietnam Academy of Science and Technology

Tran Truong Thuy, Diplomatic Academy of Vietnam

Chi-ting Tsai, National Taiwan University

Prominent experts from China also participated in the working group and provided valu-
able input, though ultimately none were comfortable being listed as members.

VI | Defusing the South China Sea Disputes: A Regional Blueprint

Introduction
The CSIS Expert Working Group on the South China Sea brings together prominent experts
on maritime law, international relations, and the marine environment from China, South-
east Asia, and beyond. The members seek consensus on realistic, actionable steps that
claimants and interested parties could take to boost cooperation and manage tensions at
sea. The group meets regularly to discuss issues that it considers necessary for the suc-
cessful management of the South China Sea disputes and produces blueprints for a path
forward on each.

The working group includes a diverse set of experts from claimant states and interested
countries, including the United States. It is chaired by Gregory Poling, director of the Asia
Maritime Transparency Initiative at the Center for Strategic and International Studies
(CSIS). All members take part in their personal capacities, not as representatives of their
home institutions. They are invited to join the group based on their subject matter exper-
tise and willingness to reach creative compromises.

Members of the group gathered three times between July 2017 and July 2018 to produce
the blueprints gathered in this report. The members believe these three proposed agree-
ments add up to a robust model for managing the South China Sea disputes, one which
would be both legally and politically feasible for all parties. They are:

1. A Blueprint for a South China Sea Code of Conduct

2. A Blueprint for Fisheries Management and Environmental Cooperation in the South

China Sea

3. A Blueprint for Cooperation on Oil and Gas Production in the South China Sea

Each of the blueprints is preceded by introductory text explaining why it is necessary

for the successful management of tensions in the South China Sea, how it might func-
tion in practice, and why the group considers it legally and politically feasible for all
parties involved.

1 | Defusing the South China Sea Disputes: A Regional Blueprint

A Blueprint for a South China Sea
Code of Conduct
The members of the Association of Southeast Asian Nations (ASEAN) and China have been
engaged in discussions on a potential code of conduct (COC) to manage the South China Sea
maritime and territorial disputes for over two decades. ASEAN issued its first statement on
the disputes in 1992 and endorsed the idea of a COC in 1996. After two years of inconclusive
negotiations, China and ASEAN settled for a nonbinding Declaration on the Conduct of Parties
in the South China Sea (DOC) in 2002. In 2005 the first draft of guidelines to implement the
DOC was drawn up, but not adopted until 2011. Despite these efforts, South China Sea ten-
sions lingered throughout the 2000s and have escalated steadily since 2009, underscoring the
need for a more robust agreement to manage the disputes.

Since late 2016, consultations between China and ASEAN on a potential COC have gained
new momentum. In August 2017 the parties adopted a bare-bones framework for the COC,
and on August 2, 2018, Singapore’s Foreign Minister Vivian Balakrishnan announced that the
sides had reached agreement on a single draft negotiating text for the COC. Leaked details of
the text show that significant hurdles remain, especially over the most sensitive issues like
the agreement’s geographic scope, potential dispute settlement mechanisms, and details of
resource exploration and development. While the history of the DOC and COC negotiations
has bred understandable skepticism, the agreement on a single negotiating draft is an import-
ant procedural step. For the first time in many years, an effective diplomatic mechanism to
manage the South China Sea disputes seems possible. But to achieve that goal, all parties will
need to show a great deal of creativity and political will.

An ASEAN-China COC should be a critical component of a regime for managing the disputes,
but its limitations need to be recognized. First, a settlement of disputes is not a realistic goal
for the time being. The COC process is rightly focused on managing the tension surrounding
the disputes and removing the triggers for conflict; it is not a dispute resolution mechanism.
This is because a final resolution of sovereignty claims and delimitation of maritime boundar-
ies according to international law, including the 1982 United Nations Convention on the Law
of the Sea (UNCLOS), could be many years away. To this end, all sides need to emphasize that
engaging in the COC process and reaching agreement on its content will be without prejudice
to the final settlement of claims and have no impact on the parties’ current legal positions
toward the disputes.

Second, because the COC process includes not just the claimants but all ASEAN members, it
is the wrong vehicle to negotiate the details of resource management in areas of overlapping
claims to waters and seabed, which is a necessary component for effectively managing the
disputes. An ASEAN-China COC can articulate and clarify aspects of the international rules-
based order as applied to the South China Sea and establish important rules and processes for
managing tensions pending the eventual settlement of disputes. To be truly effective, however,
it must lead to additional multilateral negotiations among the claimants alone on fisheries
management, environmental cooperation, and oil and gas development—all important poten-
tial triggers for conflict in which the non-claimant ASEAN members have no direct stake.

2 | Defusing the South China Sea Disputes: A Regional Blueprint

Reaching agreements that are both effective and acceptable to all parties will require framing
necessary compromises so that the South China Sea claimants can adjust their positions with-
out violating domestic or international law. Finding those mutually-agreeable compromises
will be difficult but not impossible if all sides are committed to the project. An ASEAN-China
COC should be the first step in that process.

As such, China and the ASEAN member-states should:

1. Agree to uphold the freedom of navigation in and overflight above the South China Sea as
provided for by universally recognized principles of international law, including UNCLOS.

2. Commit to resolve disputes by peaceful means and manage any disagreements related
to jurisdiction over water, seabed, and airspace without resorting to the threat or use
of force, and to exercise self-restraint and due regard to the rights of other parties in
the conduct of their activities in the South China Sea.

3. Refrain from occupying, inhabiting, or constructing facilities on currently uninhabited

features.

4. Undertake to improve the safety of navigation, communication, and search and rescue
in the South China Sea, as follows:

a. Agree to commence negotiations on a code governing protocols for communication

between naval and law enforcement vessels that encounter each other at sea to
reduce the chance of incidents and de-escalate those that occur. This could involve
either the negotiation of a wholly new agreement based on international best prac-
tices or the extension of the Code for Unplanned Encounters at Sea (CUES), which
governs communication protocols between naval vessels, to cover encounters
among law enforcement ships and between law enforcement and naval vessels.

b. Establish a program under the ASEAN-China Maritime Cooperation Fund to train

regional fishers in good seamanship and the International Regulations for Preventing
Collisions at Sea (COLREGS) and promote the equipment of fishing vessels with mod-
ern radio equipment and automatic identification system (AIS) transceivers.

c. Pursue the establishment of mechanisms for the avoidance, rapid de-escalation, and
management of incidents involving the parties’ nationals, vessels, or aircraft to avoid
aggravating the disputes. Such mechanisms may include hotlines between relevant
ministries, technical working or eminent persons groups to minimize triggers of con-
flict, and a South China Sea passage guide to be distributed widely.

d. Encourage joint training and exercise activities among regional maritime law en-
forcement agencies to promote best practices and minimize the risk of incidents
at sea, and work with the Heads of the Asian Coast Guard Agencies Meeting to
develop a set of principles governing the operation of maritime law enforcement
agencies in the South China Sea.

e. Establish a dialogue mechanism to explore provisional and practical cooperation

in search and rescue regardless of potential gaps or overlap between claimed
Maritime Search and Rescue Regions or Aeronautical Search and Rescue Regions,

3 | Defusing the South China Sea Disputes: A Regional Blueprint

 PROVISIONAL OVERSIGHT
OF MARINE SCIENTIFIC
RESEARCH
Vietnam
China
Philippines
Malaysia
Brunei
Indonesia

keeping in mind that safety of life at sea is a paramount and common interest of
all parties.

5. Explore avenues for cooperation on transnational crime, encompassing but not limited
to piracy and armed robbery at sea, drugs and arms smuggling, human trafficking, and
fisheries crime.

6. Cooperate on marine scientific research, as follows:

a. Permission should be sought from each South China Sea coastal state for marine
scientific research within 200 nautical miles of their coastlines, pending the eventual
delimitation of maritime claims. In areas of overlap, unless a previous bilateral agree-
ment has been reached, a median line will be used to determine which state has the
provisional right to grant permission for marine scientific research. This arrangement
is detailed in the map above.

b. Agree that the provisional right of states to grant permission for marine scientific
research, as well as the undertaking of such projects, will have no impact on territorial
claims or the eventual delimitation of maritime boundaries and cannot be construed
as recognition of the claims of others.

c. Grant permission for marine scientific research within these provisional zones
under normal circumstances. Claimants may withhold permission in those cases
allowed by Article 246(5) of UNCLOS, including for projects that affect exploration
or exploitation of resources, employ explosives or environmentally harmful sub-
stances, or involve the construction or operation of artificial structures.

d. Coordinate joint marine scientific research cruises throughout the South China
Sea with experts from all claimants invited to participate.

e. Each claimant should facilitate visits by experts from other claimant nations to
conduct research on islands and reefs that it occupies, with due regard giv-

4 | Defusing the South China Sea Disputes: A Regional Blueprint

 en to the need to restrict access to sensitive military sites. Claimants should
agree that research trips will be organized without prejudice to the outstanding
claims of other parties and that participation will not imply recognition on the
part of individual researchers or governments of the claims of the org

f. Host regular scientific workshops supported by all neighboring governments

with participation of experts from across the region and beyond.

g. Invest, both as individual governments and as a group, in programs to raise

public awareness of the importance of and threats to the marine environment
and fisheries as common, renewable resources.

h. Cooperate on marine archaeology and encourage joint conferences and historical

research to broaden public understanding of the South China Sea as a shared space
and resource used for millennia by peoples from across the region and beyond.

7. Endorse the immediate commencement of negotiations on environmental conserva-

tion and protection, fisheries management, oil and gas development, and other marine
economic development efforts in the South China Sea among the affected parties.

8. Agree that in the case of a dispute over the interpretation or implementation of this
agreement, either party may request the establishment of a commission of mediation,
inquiry, or conciliation according to the following procedures:

a. Each party to this agreement will name up to four experts in maritime affairs to be
registered on a list to serve as potential members of a commission of mediation,
inquiry, or conciliation. If a party has fewer than four experts registered to the list
at any time, it may name additional experts to fill its quota.

b. A party to a dispute may request the establishment of a commission once it is satisfied

that direct negotiations cannot resolve the issue. Participation in the process of media-
tion, inquiry, or conciliation will then be compulsory for all parties to the dispute.

c. Each party to the dispute will appoint two experts from the standing list of po-
tential members to serve on the commission. A party may not appoint one of the
experts that it named to the list.

d. Once all parties to the dispute have made their selections, those appointed com-
missioners will elect another expert from the list to serve as the chairperson of
the commission. That chairperson may not be selected from among those experts
named to the list by one of the disputing parties.

e. The commission will determine its own procedure for investigating and mediating
the dispute, unless the parties to the dispute have already agreed to a procedure.

f. The commission will issue a decision outlining its conclusions on all questions of
fact or law relevant to the dispute and make its recommendations for a settlement
between the parties.

9. Invite outside states, international organizations, and other relevant parties to endorse
this agreement.

5 | Defusing the South China Sea Disputes: A Regional Blueprint

A Blueprint for Fisheries Management
and Environmental Cooperation in the
South China Sea
The South China Sea is one of the world’s top five most productive fishing zones, account-
ing for about 12 percent of global fish catch in 2015. More than half of the fishing vessels
in the world operate in these waters, officially employing around 3.7 million people and
likely many more when illegal, unregulated, and unreported fishing is included. But this
vital marine ecosystem is seriously threatened by overfishing, which is encouraged by
government subsidies, harmful fishing practices, and, in recent years, large-scale clam
harvesting and dredging for island construction.

On the left, the relatively healthy but overfished reef flat surrounding Thitu Island; on the right,
a reef flat approximately 1.5 nautical miles away destroyed by Chinese clam harvesters. Both
photos dated February 2016, courtesy of John McManus. 

Total fish stocks in the South China Sea have been depleted by 70-95 percent since the
1950s and catch rates have declined by 66-75 percent over the last 20 years. Giant clam
harvesting, dredging, and artificial island building in recent years have severely damaged
or destroyed over 160 square kilometers, or about 40,000 acres, of coral reefs, which were
already declining by 16 percent per decade. The entire South China Sea fishery, which em-
ploys millions of people and helps feed hundreds of millions, is now in danger of collapse
unless claimants act urgently to arrest the decline.

Article 123 of the United Nations Convention on the Law of the Sea (UNCLOS) mandates
that states bordering semi-enclosed seas like the South China Sea are obligated to coop-
erate in areas that include the protection of the marine environment and management of
fish stocks. This is reflective of the deeply interconnected ecologies of semi-enclosed seas,
in which currents cycle marine life (and pollution) through the region without regard for
national jurisdiction. Moreover, Article 192 of UNCLOS provides a general obligation for
states to “protect and preserve the marine environment.” Unlike hydrocarbons, for which
exploitation rights are based only upon a state’s entitlement to the continental shelf, the
obligation to jointly steward living marine resources makes fisheries management and
environmental protection “low-hanging fruit” for cooperation in the South China Sea.

6 | Defusing the South China Sea Disputes: A Regional Blueprint

An effective system to manage the fisheries and environment of the South China Sea can-
not be based primarily on the overlapping territorial and maritime claims to which the fish
pay no attention. Instead it must be built around the entire marine ecosystem, particularly
the reef systems on which much marine life depends. With political will, it is entirely pos-
sible for nations bordering the South China Sea to cooperatively protect these ecosystems
and manage fish stocks without prejudice to their overlapping territorial and maritime
claims. For instance, the Philippines, whose government is under a strict constitutional
requirement to defend the nation’s sovereign rights over its waters and continental shelf,
could agree to cooperate on fisheries management in disputed waters under Article 123
of UNCLOS without prejudicing its claims or bestowing legitimacy on the claims of others
and therefore without running afoul of its domestic law.

The international legal obligation to cooperate on fisheries management and the environ-
ment is matched by practical necessity. Communities all around the South China Sea are
highly dependent on fish stocks for both food security and local livelihoods. Yet the region
has seen catch rates plummet in recent years thanks to a combination of overfishing and
willful environmental destruction. In the South China Sea, fish may spawn in one nation’s
exclusive economic zone (EEZ), live as juveniles in another’s, and spend most of their
adult lives in a third. Overfishing or environmental destruction at any point in the chain
affects all those who live around the sea. The entire South China Sea is teetering on the
edge of a fisheries collapse, and the only way to avoid it is through multilateral coopera-
tion in disputed waters.

Frequently discussed options for the protection of South China Sea fish stocks include
the creation of a new regional fisheries management organization (RFMO) or the expan-
sion of an existing body. But considering the pressing nature of the threat, the complexity
involved in establishing an RFMO, and the mixed track record of current organizations, a
more practical option would be for claimants to negotiate a mechanism to monitor stocks,
establish catch limits and protection zones, and enforce those regulations without the full
bureaucracy of an RFMO. Such an arrangement could, over time, evolve into a more robust
and institutionalized organization.

To that end, claimants and littoral states should agree to:

1. Establish a Fishery and Environmental Management Area in the South China Sea
with implementation and enforcement drawing from successful precedents including
the Great Barrier Reef Marine Park and the OSPAR Convention. The management area
will constitute a series of distinct ecosystem-based fisheries zones covering the reefs
that are vital to regional fish stocks, including the Paracel Islands, Spratly Islands, Scar-
borough Shoal, and Luconia Shoals, as well as the waters between, in which pelagic
species are fished. It will function according to the following procedures:

a. The management area will not necessitate a complete ban on fishing. Instead it
will consist of a patchwork of tailored fisheries zones. These might include no-
catch zones to allow dangerously depleted fisheries to replenish, zones where
only certain types of fishing will be restricted, and zones with no restrictions
at all. See the map on the next page for an example of this type of scheme as
applied to the Great Barrier Reef.

7 | Defusing the South China Sea Disputes: A Regional Blueprint

A map of marine park zoning in the Great Barrier Reef as an example of similar potential zoning
in the South China Sea.

b. Involvement by parties in the establishment and enforcement of the manage-

ment area will be without prejudice to existing territorial and maritime claims
and cannot be construed as recognition by any party of the claims of others.

c. Determinations of what types of fishing will be banned or allowed in each area

should be made based solely on scientific criteria, such as reef health and im-
portance to migratory fish stocks.

d. All parties will appoint an agreed-upon number of members to a commission of inde-

pendent experts and officials from relevant fisheries, maritime, and scientific agencies
to establish the layout of the management area and make regular adjustments.

e. All claimants and littoral states bordering the South China Sea should be involved
in the creation and management of the fisheries zones because all are reliant upon
a healthy marine ecosystem in this semi-enclosed sea. This means that Brunei,
China, Indonesia, Malaysia, the Philippines, Singapore, Taiwan, and Vietnam
should be involved in the scientific research in and mapping of fisheries zones.

f. An advisory body on the management of pelagic fish species should be established

to include both the South China Sea claimants and Gulf of Thailand littoral coun-
tries. The latter need not be involved in the creation of fisheries zones covering
reef fish in the South China Sea but should be consulted regarding zones aimed at
managing migratory stocks that travel between the two bodies of water.

2. Split enforcement responsibilities between occupiers and flag states, as follows:

a. Parties will bear responsibility for monitoring and interdiction of ships vio-
lating the fishing restrictions set by the multilateral commission within 20

8 | Defusing the South China Sea Disputes: A Regional Blueprint

 nautical miles of outposts they occupy on disputed features AND in those parts
of the management area within 200 nautical miles of their coastlines. In areas
of overlapping jurisdiction, the 20-nautical-mile zone around occupied features
will take precedence over the 200-nautical-mile zone from the coast. If two
coastal zones or two zones from occupied features overlap, a median line will
be used to separate the areas of responsibility. These enforcement zones are
illustrated in the map on the next page.

b. Parties may issue fishing licenses for domestic and foreign fishers within their
provisional enforcement zones, consistent with the restrictions established by
the multilateral commission for the management area.

c. These jurisdictional zones do not constitute a judgment about sovereignty over

occupied features or their legal status (as islands, rocks, low-tide elevations, or
submerged features). They are provisional arrangements, not a recognition of
entitlements to territorial seas or EEZs and will not prejudice the future delimi-
tation of maritime boundaries.

d. Patrol and interdiction of ships violating the mutually agreed-upon fishing restric-
tions in parts of the management area beyond these jurisdictional zones may be
undertaken by any claimant. This includes all areas farther than 200 nautical miles
from coastlines and 20 nautical miles from occupied features. Claimants should
seek to coordinate patrols, including with the eventual use of ship-rider agree-
ments, and share maritime domain awareness information in these areas.

e. Prosecution of ships from a claimant or South China Sea littoral state that
violate fishing restrictions in the management area will be the responsibility of
the flag state. The arresting party should arrange to transfer such vessels and
their crew in a timely manner. Prosecution of violators from non-party states
should be the responsibility of the arresting party.

3. Agree not to use subsidies to encourage fishing within the already overfished South
China Sea, as follows:

a. Agree to forego geographically-defined subsidies that might encourage fishing

within the management area.

b. Agree that fishers found to violate the management area’s restrictions will lose
access to any existing government subsidy and support programs meant to support
the fishing industry.

4. Coordinate efforts to reintroduce giant clams and other threatened species such as sea
turtles to depopulated reefs in the South China Sea, as follows:

a. Provide funding, coordination, and logistical support for a consortium of universities

and research organizations to lead this effort, including those in China and South-
east Asia already engaged in raising giant clams in captivity.

b. Each claimant will be responsible for planting clams and reintroducing other
species on reefs it currently occupies. Eventually, unoccupied reefs should be

9 | Defusing the South China Sea Disputes: A Regional Blueprint

10 | Defusing the South China Sea Disputes: A Regional Blueprint
 repopulated by multinational civilian teams, though in the short- and medi-
um-term priority should be given to reefs near occupied features as they will
be much easier to protect from poachers. Such activities will be undertaken
without regard to or prejudice for territorial claims.

5. Avoid activities that damage the marine environment or alter the seabed, as follows:

a. Refrain from any intentional destruction of marine habitats, including by dredging,

land reclamation, or construction of facilities on unoccupied reefs.

b. Commit to perform and publicly release environmental impact assessments before

undertaking construction or renovation work on occupied features.

6. Agree that in the case of a dispute over the interpretation or implementation of this
agreement, either party may request the establishment of a commission of mediation,
inquiry, or conciliation according to the procedures:

a. Each party to this agreement will name up to four experts in maritime affairs to
be registered on a list to serve as potential members of a commission of media-
tion, inquiry, or conciliation. If a party has fewer than four experts registered to
the list at any time, it may name additional experts to fill its quota.

b. A party to a dispute may request the establishment of a commission once it is

satisfied that direct negotiations cannot resolve the issue. Participation in the
process of mediation, inquiry, or conciliation will then be compulsory for all
parties to the dispute.

c. Each party to the dispute will appoint two experts from the standing list of
potential members to serve on the commission. A party may not appoint one of
the experts that it named to the list.

d. Once all parties to the dispute have made their selections, those appointed
commissioners will elect another expert from the list to serve as the chair-
person of the commission. That chairperson may not be selected from among
those experts named to the list by one of the disputing parties.

e. The commission will determine its own procedure for investigating and mediating
the dispute, unless the parties to the dispute have already agreed to a procedure.

f. The commission will issue a decision outlining its conclusions on all questions
of fact or law relevant to the dispute and make its recommendations for a set-
tlement between the parties.

11 | Defusing the South China Sea Disputes: A Regional Blueprint

A Blueprint for Cooperation on Oil and Gas
Production in the South China Sea
Competition for oil and gas resources has repeatedly triggered standoffs between claim-
ants in the South China Sea in recent years, especially between China, the Philippines,
and Vietnam. The last serious attempt to cooperate on this front was the trilateral Joint
Marine Seismic Undertaking of 2005 to 2008, which was allowed to expire amid political
controversy and questions about its constitutionality in the Philippines. Since late 2016,
the Philippine and Chinese governments have been discussing joint development of
hydrocarbons at Reed Bank, but there has been little apparent progress despite optimistic
official pronouncements. Independent experts and prominent jurists in the Philippines
have said any such scheme would likely be unconstitutional based on the strict provisions
in the country’s charter demanding that the government protect the nation’s rights to
offshore resources.

The U.S. Energy Information Agency estimates that the South China Sea holds about
190 trillion cubic feet of natural gas and 11 billion barrels of oil in proved and probable
reserves, most of which lie along the margins of the South China Sea rather than under
disputed islets and reefs. The U.S. Geological Survey in 2012 estimated that there could
be another 160 trillion cubic feet of natural gas and 12 billion barrels of oil undiscovered
in the South China Sea. Beijing’s estimates for hydrocarbon resources under the sea are
considerably higher but still modest in relation to China’s overall demand—the country’s
oil consumption in 2018 is expected to top 12.8 million barrels per day.

For Vietnam and the Philippines, however, access to energy resources in the South Chi-
na Sea is crucial. Block 06.1, part of the Nam Con Son project near Vanguard Bank, sup-
plies about 10 percent of Vietnam’s total energy needs. The Philippines generates about a
third of the electricity for its main island of Luzon from a single source, the Malampaya
gas field, which is expected to cease production by 2024. Unless an alternative is found—
and Reed Bank is the only good option currently on the table—the Philippines will need
to either import significant amounts of natural gas at greater costs, rapidly incorporate
other energy sources into its power supply, or face severe shortages.

Cooperation on disputed oil and gas resources is more difficult, both legally and polit-
ically, than for fisheries or environmental management. Unlike for fish, there is no
provision in the United Nations Convention on the Law of the Sea (UNCLOS) mandating
that states cooperate to manage oil and gas resources in a semi-enclosed sea like the
South China Sea. UNCLOS articles 74 and 83 do say that in the absence of a final delim-
itation of maritime boundaries, states should exercise mutual restraint and establish
“provisional arrangements of a practical nature” to manage their disputes, which offers
a narrow foundation for compromise. But successful bilateral joint development agree-
ments for oil and gas in disputed waters are relatively few, and there are no cases of fully
operational “provisional arrangements” involving three or more parties. Nonetheless,
finding a way forward is necessary if the claimants hope to defuse tensions and avoid
harming their energy security.

12 | Defusing the South China Sea Disputes: A Regional Blueprint

Despite the obvious difficulties, it is possible for claimants to cooperate on oil and gas
development in the South China Sea in a manner that would be both equitable and con-
sistent with international law as well as the laws of all involved parties. Doing so would
require considerable creativity and a greater willingness to compromise, especially by
China, than has been evident to date. Such an agreement would need to be framed so that
all parties could claim it was consistent with their interpretations of both domestic and
international law. Most difficult would be finding a way for Beijing to reason that such
cooperation was consistent with its assertions of “historic rights” while at the same time
ensuring that Manila could uphold its 2016 award from an arbitral tribunal in The Hague
and that all coastal states could maintain jurisdiction over their continental shelves.

Striking that precarious balance would require some politically difficult but legally feasible
concessions up front. First, China would need to accept that being guaranteed a share of
the profits from oil and gas resources throughout the South China Sea would be enough
to satisfy its demand for “historic rights.” This would mean accepting a system in which
other claimants exercise jurisdiction by licensing oil and gas exploration so long as Beijing
shares in the spoils. This should be possible, given that no Chinese law, official statement,
or government document has ever clarified exactly what historic rights Beijing claims.

Second, all claimants must be willing to forego pursuing oil and gas drilling based on en-
titlements from the disputed islands and reefs of the South China Sea. Fisheries manage-
ment areas around the reef systems could provide a politically palatable way to cordon
these features off from exploration without dealing with their legal statuses or delimi-
tation issues. For China, which sees the islands as fully entitled to exclusive economic
zones (EEZs) and continental shelves, this could be internally justified as a magnanimous
gesture and act of good faith. Beijing could reason that even if the disputed features were
islands under article 121.3 of UNCLOS, any equitable delimitation of boundaries with the
much longer coastlines of the Southeast Asian states opposite them would result in their
EEZs and continental shelves being reduced to small enclaves around the features. For the
other claimants, agreeing to forego drilling around the disputed reefs and islands based on
the need for environmental conservation should prove a politically palatable rationale to
focus petroleum exploration and development on areas closer to their coasts.

These concessions would need to underpin the agreement without being spelled out in its
text. That would allow each party to agree on the mechanisms for cooperation while still
using different domestic legal justifications for doing so.

To that end, claimants and littoral states should agree to:

1. Establish a joint venture, in the form of a new commercial entity, in each South China
Sea littoral state involving that claimant’s national petroleum company and as many
of its counterparts from the other claimants as are interested in investing. Each joint
venture’s sole business will be exploration and production of South China Sea hydro-
carbon resources off that country’s coast. There are already successful models of joint
ventures among state-owned petroleum companies operating in the South China Sea,
but a multiparty corporation established by parties to a dispute would be groundbreak-
ing. These joint ventures will operate as follows:

13 | Defusing the South China Sea Disputes: A Regional Blueprint

 a. The corporations will seek to acquire petroleum licenses for new offshore blocks in
the South China Sea offered by the countries in which they are headquartered, either
via production sharing agreements or service contracts, depending on the domestic
law of the tendering state. This will ensure that all parties have the opportunity to
benefit from oil and gas production throughout the South China Sea.

The joint ventures will seek to purchase stakes that their individual member-com-
panies already hold in petroleum licenses in the portions of the South China Sea
with which they are concerned. Existing contracts that coastal states have with other
parties will not be affected, but the corporations may seek to acquire those licenses
when they are relinquished by the current operators. The corporations may also seek
to purchase minority stakes in commercially producing blocks in which the current
operator is unlikely to relinquish the license any time soon. For a survey of oil and
gas blocks that have been licensed by the Southeast Asian claimants or that are cur-
rently open for bids, see the map below.

b. Decisions by the joint ventures to invest in specific blocks in the South China Sea
will have no impact on territorial claims or the eventual delimitation of maritime
boundaries and cannot be construed as recognition of the claims of any party by
the other members of the joint venture. To this end, an explicit non-prejudice
clause will be incorporated into the agreements creating the joint ventures and in
all contracts into which they enter.

c. Each claimant will be guaranteed the right to invest, through their national oil
companies, in each of the joint ventures but will be under no obligation to do so.
This means that one claimant, such as China, might have a company invested in
each of the joint ventures while another might invest in only one or two. Any

OIL AND GAS BLOCKS

China
Vietnam
Malaysia
Philippines
Brunei
Indonesia
Joint Development Areas

14 | Defusing the South China Sea Disputes: A Regional Blueprint

 claimant that does not have its national oil company invest in a given joint venture
at the time of its establishment will be welcome to do so in the future. Conversely,
each company will be free to divest its stake in any given joint venture at any time
(though only to the other national oil companies).

d. Equal ownership stakes by each company involved in the joint venture might be
preferable in some cases, while in others some might wish to invest more or less
depending on their capabilities and interests. These details should be left up to
negotiation and adjustment as needed. Similarly, the details of how each corporation
makes investment decisions and which stakeholder(s) acts as the operator in any
given project should be left to negotiation among the national oil companies. Profits
from the joint ventures’ operations should be shared based on each partner compa-
ny’s stake in the corporation.

2. Agree that all South China Sea littoral states may license petroleum exploration and
production within 200 nautical miles of their coastlines pending the eventual delim-
itation of maritime claims. In areas of overlap, unless a previous bilateral agreement
has been reached, a median line will be used to determine which state has the provi-
sional right to license exploration and production. This arrangement is detailed in the
map on the next page. Licensing will function as follows:

a. The establishment of offshore blocks will have no impact on territorial claims or the
eventual delimitation of maritime boundaries and cannot be construed as recogni-
tion of the claims of others. Any licenses issued by the coastal states will also incor-
porate a non-prejudice clause specifying that this provisional arrangement will have
no effect on the final delimitation of boundaries.

b. The licensing process will operate according to the domestic laws of the coast-
al states. In some cases, governments could simply grant licenses to the joint
venture engaged in hydrocarbon exploration and production off its coast, while
in others competitive bidding might be necessary. Even in those cases requiring
bidding, the joint ventures will have considerable advantages—political and oth-
erwise—over competitors.

c. The coastal state that tenders a license acquired by one of the joint venture corpora-
tions will enjoy the same share of profits (the majority in most cases) and the same
right to taxation as it would in tendering the license to any other company. This will
guarantee that the littoral states benefit most from the resources off their coasts
while still allowing all members of the joint venture a share in the profits.

d. Any existing joint development frameworks, such as those between Malaysia and
Brunei off the latter’s coast or between Malaysia and Vietnam near the entrance to
the Gulf of Thailand (see map), will remain unchanged. The newly-established joint
ventures in the countries concerned will seek to acquire licenses in these areas as
any oil company might, while the coastal states will tender licenses and split profits
according to their preexisting agreement.

3. Agree to forego oil and gas exploration in protected fisheries zones covering the vital
reef systems of the South China Sea, including the Spratly and Paracel Islands, Scarbor-

15 | Defusing the South China Sea Disputes: A Regional Blueprint

 Licensing Rights
Brunei
China
Indonesia
Malaysia
Philippines
Vietnam
Joint Development
Areas

ough Shoal, and Luconia Shoals, as determined by a multilateral body of independent

experts and regional officials (see Blueprint for Fisheries Management and Environ-
mental Cooperation).

4. Undertake a joint oil and gas survey, performed by one or more of the corporations, of
the area of seabed in the center of the South China Sea beyond 200 nautical miles from
the coastlines as a provisional measure. This will serve as an acknowledgment that
some areas beyond 200 nautical miles are subject to overlapping extended continental
shelf claims by the coastal states while other areas might be entirely beyond any conti-
nental shelves and therefore constitute part of the common heritage of mankind.

5. Agree that in the case of a dispute over the interpretation or implementation of this
agreement, either party may request the establishment of a commission of mediation,
inquiry, or conciliation according to the following procedures:

a. Each party to this agreement will name up to four experts in maritime affairs to be
registered on a list to serve as potential members of a commission of mediation,
inquiry, or conciliation. If a party has fewer than four experts registered to the list at
any time, it may name additional experts to fill its quota.

16 | Defusing the South China Sea Disputes: A Regional Blueprint

 b. A party to a dispute may request the establishment of a commission once it is sat-
isfied that direct negotiations cannot resolve the issue. Participation in the process
of mediation, inquiry, or conciliation will then be compulsory for all parties to the
dispute.

c. Each party to the dispute will appoint two experts from the standing list of po-
tential members to serve on the commission. A party may not appoint one of the
experts that it named to the list.

d. Once all parties to the dispute have made their selections, those appointed com-
missioners will elect another expert from the list to serve as the chairperson of
the commission. That chairperson may not be selected from among those experts
named to the list by one of the disputing parties.

e. The commission will determine its own procedure for investigating and mediating
the dispute, unless the parties to the dispute have already agreed to a procedure.

f. The commission will issue a decision outlining its conclusions on all questions of
fact or law relevant to the dispute and make its recommendations for a settlement
between the parties.

17 | Defusing the South China Sea Disputes: A Regional Blueprint

About the Authors
JAY BATONGBACAL
Jay L. Batongbacal is an associate professor at the University of the Philippines College of
Law and director of the university’s Institute for Maritime Affairs and Law of the Sea. He
was a U.S.-ASEAN Fulbright Initiative visiting scholar in Washington, D.C. in 2014-2015,
assisted the Philippines in pursuing its claim to a continental shelf beyond 200 nautical
miles in the Benham Rise Region, and is listed as one of the UNESCO/IOC experts for spe-
cial arbitration under UNCLOS Annex VIII.

ZACK COOPER
Zack Cooper is a research fellow at the American Enterprise Institute. Previously, he was
senior fellow for Asian security at the Center for Strategic and International Studies. He
has also served on staff at the National Security Council and in the Office of the Secretary
of Defense. He received a BA from Stanford University and an MPA, MA, and PhD from
Princeton University.

TARA DAVENPORT
Tara Davenport is presently an instructor at National University of Singapore (NUS) and
is pursuing a doctorate at Yale Law School. She is also a Fulbright scholar and recipient of
the NUS Overseas Graduate Scholarship. She has worked previously as a shipping lawyer
in Singapore and as a research fellow at the Centre for International Law (CIL) at NUS.
She has co-taught Law of the Sea at NUS and at Yale Law School, published several articles
on oceans law and policy, and edited two books. Ms. Davenport holds a Bachelor of Laws
from the London School of Economics, a Master of Laws (Maritime Law) from NUS, and a
Master of Laws from Yale Law School.

DONALD EMMERSON
Donald K. Emmerson heads the Southeast Asia Program at Stanford University. His recent
South China Sea-related publications have appeared in Contemporary Southeast Asia, The
Diplomat, President Trump’s Asia Inbox, The South China Sea Disputes: Flashpoints, Turning
Points and Trajectories, and YaleGlobal. Earlier maritime writing includes “Orders of Mean-
ing: Understanding Political Change in a Fishing Community in Indonesia” (1983) and
Rethinking Artisanal Fisheries Development (1980). His degrees are from Yale (PhD) and
Princeton (BA).

MATTHEW FUNAIOLE
Matthew P. Funaiole is a fellow with the China Power Project at the Center for Strategic
and International Studies (CSIS) where he works on initiatives covering Chinese foreign
and security policy, cross-strait relations, and Asia-Pacific security architecture. He is the
principal researcher for the ChinaPower website, which uses data visualization and writ-
ten analysis to unpack the complexity of China’s rise. His research interests also include
maritime trade, power dynamics, and alliance structures.

BONNIE GLASER
Bonnie S. Glaser is a senior adviser for Asia and the director of the China Power Project at
the Center for Strategic and International Studies (CSIS), where she works on issues relat-

18 | Defusing the South China Sea Disputes: A Regional Blueprint

ed to Chinese foreign and security policy. She is concomitantly a non-resident fellow with
the Lowy Institute in Sydney and a senior associate with the Pacific Forum.

MICHAEL GREEN
Michael Jonathan Green is senior vice president for Asia and Japan Chair at the Center for
Strategic and International Studies (CSIS) and an associate professor at the Edmund A.
Walsh School of Foreign Service at Georgetown University. He served on the staff of the
National Security Council (NSC) from 2001 through 2005, first as director for Asian affairs,
and then as special assistant to the president for national security affairs and senior direc-
tor for Asia.

BRIAN HARDING
Brian Harding serves as deputy director and fellow of the Southeast Asia Program at the
Center for Strategic and International Studies (CSIS). Before joining CSIS in 2018, he
served as director for East and Southeast Asia policy at the Center for American Progress.
From 2009 to 2013, he served in the Office of the Secretary of Defense (Policy) at the Pen-
tagon as country director for Asian and Pacific security affairs.

BILL HAYTON
Bill Hayton is an associate fellow with the Asia-Pacific Programme at Chatham House and
works for BBC World News television in London. He is the author of The South China Sea:
The Struggle for Power in Asia.

MURRAY HIEBERT
Murray Hiebert is a senior associate of the Southeast Asia Program at the Center for
Strategic and International Studies (CSIS) in Washington, D.C. He earlier served as senior
adviser and deputy director of the CSIS Southeast Asia Program. Prior to joining CSIS, Mr.
Hiebert was senior director for Southeast Asia at the U.S. Chamber of Commerce. Earlier,
he was a journalist with the Wall Street Journal and the Far Eastern Economic Review, report-
ing on U.S.-Asia relations.

CHRISTOPHER JOHNSON
Christopher Johnson is a senior adviser and holds the Freeman Chair in China Studies at
the Center for Strategic and International Studies (CSIS). He served in the U.S. govern-
ment’s intelligence and foreign affairs communities for nearly two decades, during which
he worked as a senior China analyst for the Central Intelligence Agency (CIA) and as intel-
ligence liaison for two secretaries of state and their deputies.

ISAAC KARDON
Isaac B. Kardon is an assistant professor at the U.S. Naval War College, where he is a core
member of the China Maritime Studies Institute. Previously, he was a visiting scholar at
NYU Law. He holds a PhD in government from Cornell University, an MPhil in modern Chi-
nese studies from Oxford University, a BA in history from Dartmouth College, and studied
Mandarin at Peking University, Taiwan Normal University, and Tsinghua University.

CARMEN ABLAN LAGMAN

Dr. Ma. Carmen Ablan Lagman is currently a full-professor at the Biology Department of
De La Salle University. She serves as a resource for international and local working groups,
conferences, and think tanks on fisheries and transboundary resources in the South China

19 | Defusing the South China Sea Disputes: A Regional Blueprint

Sea. She has led a project among scientists that looked into connectivity of coral reef asso-
ciated species.

EVAN LAKSMANA
Evan Laksmana is a researcher at the Centre for Strategic and International Studies in
Jakarta and currently a visiting fellow at the National Bureau of Asian Research in Seattle.
He is also a PhD candidate at Syracuse University’s Maxwell School of Citizenship and
Public Affairs.

JOSEPH CHINYONG LIOW

Joseph Chinyong Liow is dean and professor of comparative and international politics at
the S. Rajaratnam School of International Studies, Nanyang Technological University, Sin-
gapore. He was the inaugural holder of the Lee Kuan Yew Chair in Southeast Asia Studies
and senior fellow at the Brookings Institution.

MICHAEL MCDEVITT
Rear Admiral (Ret.) Michael McDevitt is a senior fellow in strategic studies at the Center
for Naval Analyses. During his Navy career, Rear Admiral McDevitt held four at-sea com-
mands, including command of an aircraft carrier battle group.

JOHN MCMANUS
John W. McManus, PhD, is a marine ecologist and professor at the Rosenstiel School of the
University of Miami. He has authored over 100 publications and has made several re-
search trips to the disputed reefs of the South China Sea. He was recognized by the World
Technology Network as among the most innovative individuals in the world in 2006.

ELINA NOOR
Elina Noor is an associate professor at the Daniel K. Inouye Asia-Pacific Center for Security
Studies where she focuses on international security, international law, and cyberspace;
countering violent extremism; and Southeast Asia. Previously she was director for foreign
policy and security studies at the Institute of Strategic and International Studies (ISIS),
Malaysia and a member of the Brookings Institution’s Project on U.S. Relations with the
Islamic World.

PRASHANTH PARAMESWARAN
Prashanth Parameswaran is associate editor at The Diplomat based in Washington, D.C.,
where he writes mostly on Southeast Asia, Asian security affairs, and U.S. foreign policy in
the Asia Pacific. He is also a PhD candidate at the Fletcher School of Law and Diplomacy at
Tufts University. An ASEAN citizen who grew up in Malaysia, Singapore, and the Philip-
pines before moving to the United States, Prashanth previously worked on Asian affairs at
several think tanks including the Center for Strategic and International Studies (CSIS).

GREGORY POLING
Gregory B. Poling is director of the Asia Maritime Transparency Initiative and a fellow with
the Southeast Asia Program at the Center for Strategic and International Studies (CSIS).
He oversees research on U.S. foreign policy in the Asia Pacific, with a focus on the mari-
time domain and the countries of Southeast Asia. His research interests include the South
China Sea disputes, democratization in Southeast Asia, and Asian multilateralism.

20 | Defusing the South China Sea Disputes: A Regional Blueprint

CLIVE SCHOFIELD
Clive Schofield is head of research at the WMU-Sasakawa Global Ocean Institute, World
Maritime University (WMU) in Malmö, Sweden. He was previously director of research at
the Australian Centre for Ocean Resources and Security (ANCORS), University of Wollon-
gong (UOW), Australia. He served as an independent expert witness in the arbitration case
between the Philippines and China in the South China Sea.

AMY SEARIGHT
Dr. Amy Searight serves as senior adviser and director of the Southeast Asia Program at
the Center for Strategic and International Studies (CSIS) in Washington, D.C. Dr. Searight
has wealth of experience on Asia policy—spanning defense, diplomacy, development, and
economics—in both government and academia. Most recently, she served in the Depart-
ment of Defense as deputy assistant secretary of defense for South and Southeast Asia,
from 2014 to 2016.

RASHID SUMAILA
Dr. Rashid Sumaila is professor and director of the Fisheries Economics Research Unit at
the University of British Columbia. Sumaila has authored over 215 journal articles, in-
cluding in Science and Nature. He is winner of the 2017 Benchley Oceans Award in Science
and the 2016 UBC Killam Research Prize. Dr. Sumaila was named a Hokkaido University
Ambassador in 2016. He has given talks at the UN Rio+20, White House, Canadian Parlia-
ment, African Union, and the British House of Lords.

VO SI TUAN
Vo Si Tuan is a senior scientist of the Institute of Oceanography in Nha Trang, Vietnam,
and is recognized as an expert on marine ecology and conservation. His studies and
lectures cover coral taxonomy, coral reef ecology, the science and management of marine
protected areas, biodiversity conservation, and an array of other topics. Dr. Tuan has con-
tributed significantly to regional cooperation. As a key participant in the UNEP/GEF South
China Sea Project (2002-2008), he worked closely with project coordinators and partners
in developing a regional network for marine environment management among the coun-
tries bordering the South China Sea.

TRAN TRUONG THUY

Tran Truong Thuy is a research fellow and director of the Center for East Sea (South China
Sea) Studies at the Diplomatic Academy of Vietnam (DAV). Before joining the DAV, he
worked in the European Department at the Ministry of Foreign Affairs of Vietnam and has
published extensively on maritime issues.

CHI-TING TSAI
Chi-Ting Tsai is an assistant professor of international law in the Department of Political
Science, National Taiwan University, Taipei, Taiwan. He received his J.S.D. from Cornell
Law School. His specialized fields of interest are law of the sea, East and South China Sea
disputes, international human rights, and U.S. constitutional law.

21 | Defusing the South China Sea Disputes: A Regional Blueprint

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