The Permanent Court of Arbitration (PCA) in The Hague has begun hearings into the Philippines' case against China's claims to nearly all of the South China Sea.

The world is watching closely because the South China Sea - spread over 3.5 million sq km - is critical to the global economy. Some US$5 trillion (S$6.7 trillion) in goods pass through its waters each year, linking Asia's fast-growing economies to markets in Europe, the Middle East and Africa.

Washington and Tokyo, which have been sparring with Beijing for influence in the Asia-Pacific, are concerned that China may be attempting to seize control of these vital waterways.

China insists its claims are "indisputable" because historical records have shown Chinese presence throughout the South China Sea for centuries. It formally marked the boundaries of these claims with a "nine-dash line" in 1953 . The Philippines contends that under the United Nations Convention on the Law of the Sea, that line is invalid as it stretches as far as 1,611km from the nearest Chinese land mass.

At this week's hearings before a five-judge court, led by veteran maritime judge Thomas Mensah of Ghana, the Philippines is arguing that the PCA has the authority to hear its case. China is not taking part in the proceedings, but it issued a position paper last December questioning the PCA's jurisdiction. It insists the Philippines - in seeking a determination of ownership of the islands, reefs, shoals, atolls and rocky outcrops in the South China Sea - is essentially asking the PCA to act on a question of sovereignty, which is beyond the tribunal's scope. It has already declared it will not accept a ruling in Manila's favour.

Supreme Court Associate Justice Antonio Carpio, who has helped define the Philippines' territorial boundaries, believes that while China cannot be compelled to comply, a favourable ruling will allow Manila to shame Beijing before the court of world opinion.