In a landmark ruling on Tuesday (July 12), an arbitral tribunal at The Hague concluded that there was no legal basis for China to claim historic rights to resources within the sea areas falling within its "nine-dash line".
Here are five things to know in the aftermath of the South China Sea arbitration case.
1. What did the tribunal decide?
The ruling went in favour of the Philippines, with the tribunal saying that China had violated the Philippines' sovereign rights in the latter's exclusive economic zone (EEZ).
It also found that China had violated the Philippines' sovereign rights by interfering with Philippine fishing and petroleum exploration, constructing artificial islands and failing to prevent Chinese fishermen from fishing in the zone.
The tribunal held that Philippine fishermen, like their Chinese counterparts, had traditional fishing rights at Scarborough Shoal, and that China had interfered with these rights in restricting access.
2. How did China react?
In a statement issued by its Foreign Ministry after the ruling, China reiterated its historic rights in the South China Sea. A Foreign Ministry spokesman described the award as "null and void and has no binding force".
The spokesman added that China's territorial sovereignty and maritime rights and interests in the South China Sea will not in any way be affected by the ruling.
China has refused to take part in the case, saying it involves a determination of who owns what in the South China Sea - that is, sovereignty - which falls under the purview of the International Court of Justice.
Portraying itself as the victim of a US conspiracy to contain its rise, Beijing has scoured the globe for support, and reportedly has Russia, Vanuatu, Lesotho and Palestine on its side.
3. What was the Philippines' response?
The Philippines welcomed the ruling but also called for sobriety and restraint.
"Our experts are studying this award with the care and thoroughness that this significant arbitral outcome deserves," Foreign Affairs Secretary Perfecto Yasay told a news conference.
"We call on all those concerned to exercise restraint and sobriety. The Philippines strongly affirms its respect for this milestone decision."
Professor Philippe Sands, a Queen's Counsel, who is a member of the Philippines' legal team, called it the "most significant international legal case for almost the past 20 years since the Pinochet judgment", referring to the late Augusto Pinochet, former president of Chile.
4. Why does this ruling matter?
Control of the South China Sea is seen as the most divisive and potentially destructive diplomatic issue in the region. Claimants to the South China Sea include China, the Philippines, Vietnam, Malaysia, Brunei and Taiwan.
For instance, the Paracel Islands, controlled by China since 1974, are also claimed by Vietnam and Taiwan. Tensions flared in 2014 when China moved an exploratory oil rig into the disputed waters near Vietnam.
Several other tense standoffs have also occurred in the region, including in 2012 when the Philippine Navy intercepted a group of Chinese fishermen off the Scarborough Shoal.
The area has become a testing ground of sorts as China flexes its muscles in its bid to be a world superpower.
Analysts say China's refusal to abide by the arbitration ruling could have worrying implications for peace and stability in the region.
The South China Sea is a major trade corridor, with US$5.3 trillion in ship-borne trade passing through the waters each year.
Experts estimate that the Straits of Malacca hosts more than half of the world's maritime trade, along with half of global trade for liquefied natural gas and one third for crude oil.
5. Does the ruling resolve anything?
As the tribunal lacks the legal authority to enforce its ruling, the reaction of the international community will largely determine what happens next.
While China's island-building will almost certainly continue, one option would be for it to scale back on its assertive approach in the South China Sea. There also remains the possibility of direct talks with the Philippines.
SOURCES: BBC, CNN, DAILY TELEGRAPH