SYDNEY (AFP) - China must accept a verdict declaring its South China Sea claims are invalid and needs to halt its artificial island building in the disputed waters, Australia said on Wednesday (July 13).

Foreign Minister Julie Bishop said Beijing risked reputational harm if it ignored the ruling by the UN-backed Permanent Court of Arbitration, on a case brought by Manila, which said China had no title to the waterway.

"We call on both the Philippines and China to respect the ruling, to abide by it. It is final and legally binding on both of them," Ms Bishop told national broadcaster ABC.

"This treaty, the Law of the Sea, codifies pre-existing international custom. It's a foundation to maritime trade and commerce globally, and so to ignore it would be a serious international transgression.

"There would be strong reputational costs. China seeks to be a regional and global leader and requires friendly relations with its neighbours. That's crucial to its rise."

Beijing claims most of the South China Sea, even waters approaching neighbouring countries, as its sovereign territory, basing its arguments on Chinese maps dating back to the 1940s marked with a so-called nine-dash-line.

But swathes of the sea are also claimed by other littoral states - including the Philippines, Vietnam, Malaysia, Brunei - as well as Taiwan.

After years of diplomatic headbutting, the Philippines took the case to the Hague-based PCA in 2013.

The tribunal's ruling on Tuesday was a damning repudiation of Chinese behaviour in the South China Sea, which ruled that China has no historic rights to the area and had acted illegally with large-scale land reclamation.

"Australia has been calling on China for some time to halt reclamation work and not to militarise its structures," Ms Bishop said.

"We certainly urge all parties to take steps to ease tensions, to refrain from provocative actions that would escalate tensions and lead to greater uncertainty."

The row has embroiled the United States, which has sent warships on so-called "freedom of navigation" missions through waters that carry one-third of the global oil trade.

Ms Bishop said Canberra also reserved the right to sail ships and fly planes close to some of the reefs and islands claimed by China.

"As we've done for many decades, Australian ships and aircraft will continue to exercise rights under international laws of freedom of navigation and over-flight," she said.

"We've already been doing that; we'll continue to do it."