The Permanent Court of Arbitration at the Hague is expected to make a final decision this year on the Philippines' maritime dispute with China in the South China Sea.

Its decision will have a significant impact on China and its ties with other claimant states in the South China Sea.

The case has been before the arbitration tribunal since January 2013, when the Philippines unilaterally initiated arbitration against China, with regard to the latter's claims over much of South China Sea.

The tribunal ruled at the end of last October that the case was "properly constituted" under the United Nations Convention on the Law of the Sea (Unclos). This was a blow to China, which had maintained that it will not participate in the proceedings because the tribunal has no jurisdiction over issues to do with territorial sovereignty.

China also argued that the Philippines abused the arbitration mechanism because it unilaterally initiated proceedings without exhausting diplomatic channels.

It would appear that China's steadfast policy of neither accepting nor participating in the arbitration has failed to prevent the arbitral tribunal's ruling that it has jurisdiction over part of the issues submitted by the Philippines. On Nov 30, the arbitral tribunal concluded the hearing on the merits and remaining issues of jurisdiction and admissibility in the arbitration, with the final decision due possibly between March and June.

RATIONALE BEHIND CHINA'S STANCE

China's position that the arbitral tribunal has no jurisdiction has been criticised and may appear to the casual observer as an arrogant refusal to take part in international law proceedings. In fact, there are strong grounds for its position.

First, China maintains that the core of China-Philippines disputes relates to an issue of territorial sovereignty, instead of the interpretation or application of Unclos.

Issues of sovereignty typically come under customary international law, whereas Unclos is a law that spells out the details of how to ascertain if the waters surrounding a land mass around a country should be claimed as part of its territory.

For example, a country with a land mass nearby will resort to Unclos to ascertain if the waters around it belong to it. But the question of whether that land mass belongs to that country, or another country nearby, would not come under Unclos, but would be determined by customary international law.

The Chinese government had stipulated in a declaration in August 2006 that, under Article 298 of Unclos, disputes concerning territorial sovereignty, maritime delimitation, historic titles and law-enforcement activities were excluded from the compulsory dispute-settlement procedures laid down in Unclos, including compulsory arbitration. Therefore, China maintains it enjoys leeway to choose other possible means to settle its disputes with the Philippines, and not use Unclos or arbitration.

Second, in a series of bilateral documents, the Philippines had repeatedly promised to settle disputes through consultations on the basis of equality and mutual respect. One example was a joint statement with China on the South China Sea issued on Aug 10, 1995. This should be seen as an obligation under international law. By unilaterally submitting the disputes to arbitration, the Philippines breached such an obligation, China maintains.

Third, even assuming the subject matter of the Philippines' claims could be considered in part as concerning the interpretation or application of Unclos, the core of the dispute constitutes an integral part of maritime delimitation.

China had already excluded such disputes from compulsory arbitration procedures in 2006. Besides, as stipulated by Article 283 of the Unclos, when a dispute arises, the disputants should proceed expeditiously to an exchange of views regarding its settlement by negotiation or other peaceful means. The Chinese position is that the Philippines did not honour this obligation before unilaterally initiating the arbitration procedures.

POSSIBLE CONSEQUENCES

The tribunal has already rejected some of China's key arguments. For example, its stand is that China's absence from the proceedings does not deprive the tribunal of jurisdiction. On China's criticism of the Philippines' unilateral decision to proceed with arbitration before exhausting diplomatic channels, it noted that international law does not require a state to continue negotiations when it concludes that the possibility of a negotiated solution has been exhausted.

As it stands now, it is reasonable to predict that the arbitral tribunal is likely to give a final award in favour of the Philippines.

If so, there might be a wide range of consequences.

First, China might be widely but unfairly accused of despising international law and challenging international rule. The Philippines may hype up the final decision on diplomatic arenas and international conferences, putting Chinese diplomacy on the defensive, and further undermining China's international image. This might in turn aggravate nationalist sentiments among the general public in China.

Second, the possible final award in favour of the Philippines would show that arbitration is a feasible dispute settlement channel. The decision might then embolden other disputants to take similar measures by submitting their respective disputes with China to international arbitration regardless of the strong opposition from China. This will definitely escalate tensions in the South China Sea.

It is important to note that Vietnam, Malaysia, Indonesia and Japan dispatched representatives to the hearings in July last year. Vietnam expressed its support to the arbitral tribunal regarding this case and asked the tribunal to pay due attention to the legal rights and interests of Vietnam. Such moves could be interpreted as a sign that some of these countries might take a similar path after the Philippines has blazed a trail.

Third, regardless of whether the final decision is in favour of the Philippines, it will do nothing but escalate the maritime disputes in the South China Sea. There would be no positive changes to the status quo.

The crux of the disputes lies in the fact that no country wants to give up what they hold dear. Sovereignty over islands or reefs involves core national interests, which no claimant is willing to compromise on or give up.

Jurisdiction over maritime zones involves huge economic interests that no country is willing to lose. Sea lanes and intelligence gathering involve military security and geopolitical competition, over which stakeholders are not ready to make concessions. We can reliably predict that the Philippines would gain nothing from ruffling China.

CHINA'S RESPONSES

What of China's possible responses?

First, China will surely not bow to the pressure brought by the final award of the arbitral tribunal and may pay greater efforts to continue the bilateral approach, in which it seeks to resolve issues bilaterally in negotiations, and also seeks stability within Asean.

China believes that the most effective means for settling maritime disputes between China and its neighbours is friendly consultation and negotiation between the sovereign states directly concerned. Back in 2006, China and Vietnam succeeded in demarcating the maritime zones in the Beibu Gulf (also named theGulf of Tonkin), a fact that may offer hope for the dual-track approach.

Second, it is likely that China may respond with certain precautionary measures, like promulgating the territorial sea baseline of the Nansha Islands (called Spratlys by other claimants) and declaring an air defence identification zone over the South China Sea that would require civilian aircraft flying over the area to identify themselves to the Chinese authorities.

Although China will likely honour its commitment of not militarising the artificial islands in the South China Sea, it may bolster defence-oriented military deployment on the artificial islands if the final award escalates tensions in the South China Sea.

Third, it is likely for China to devote more efforts to facilitating the set-up of a security mechanism in the South China Sea. The prevalent sense of insecurity among all the relevant parties (including the non-claimant states like the United States and Japan) can be partly attributed to the lack of a feasible security mechanism.

To put in place such a security mechanism, China may endeavour to upgrade its relations with Asean while implementing the "maritime silk road" initiative. It will then prioritise discussions on a legally binding code of conduct in the South China Sea. It is believed that such a binding arrangement will contribute to peace and stability in the South China Sea by bringing possible conflicts under better control.

•Kang Lin and Jiang Zongqiang are research fellows with the China National Institute for South China Sea Studies in Haikou, Hainan. Hu Xin is research fellow with the Washington-based Institute for China-America Studies.