A panel of the Permanent Court of Arbitration (PCA) at The Hague on Tuesday found in favor of many of the Philippines’ claims in a complicated maritime and territorial dispute with China. The ruling largely invalidates China’s nine-dash line, which claims large parts of the South China Sea as Chinese territory and exclusive economic zone. It also found that China had breached the Philippines’ territorial rights and had illegally damaged the marine environment.

China’s Foreign Ministry immediately responded that “the award is null and void and has no binding force.” Last week a Chinese official called the coming ruling “nothing more than a scrap of paper.” Harvard professor Graham Allison wrote in the Diplomat that China will of course ignore the ruling, as great powers have done historically.

At the same time, analysts worry that China will respond aggressively to the provocation implied by the ruling. The Philippines, Vietnam and other countries with maritime claims in the disputed area welcomed the ruling (although Taiwan did not).

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So why do these countries get so exercised about this “scrap of paper?”

One answer comes from research conducted by University of Maryland scholars Benjamin Appel, Sarah Croco and Paul Huth. In a series of articles, they study if and how international law affects contentious territorial disputes. They find that international law matters if it provides a clear “focal point” that can guide negotiations.

So how does this work? The law that should apply in this case is clearly laid out in the United Nations Convention on the Law of the Sea (UNCLOS). Both China and the Philippines have ratified this convention. Even the United States, which has not (yet) ratified, accepts the legal rules as part of customary international law.

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What is not clear is how the law should be applied. For example, the panel had to determine whether each of the disputed areas are islands, rocks or low-tide elevations. This seems minute, but it carries huge implications. Islands come with rights to territorial sovereignty and territorial seas with exclusive fishing and mining rights. Rocks have more modest territorial implications. Low-tide elevations don’t have any sovereignty or territorial implications. By declaring that large swaths of the disputed areas are low-tide elevations, the PCA rules that China has no sovereignty claims to make (at least over those areas). Since that territory lies within the Exclusive Economic Zone of the Philippines, this legal interpretation has important sovereignty implications.

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The second source of controversy is just who gets to interpret the legal rules. UNCLOS comes with a menu of options for legalized dispute settlement. Both China and the Philippines have essentially agreed to the jurisdiction of these bodies. But China claims that it opted out of these procedures for territorial disputes when it ratified UNCLOS. The arbitration panel did not accept this. In its view it is simply interpreting the Law of the Sea, not where exactly territorial borders run. China decided not to participate in the arbitral proceedings. But the process went ahead anyway.

But the PCA ruling may well affect how other countries approach this dispute. For example, the United States takes no official position on the relative merit of competing claims, but it is “exhorting all the parties to follow the rules of international law.” Other countries have similar positions. They would like to avoid diplomatic controversies with China and the other parties to the dispute. But they explicitly take the position that the conflict should be resolved in accordance with international law. The many international lawyers in foreign ministries around the world are not easily going to ignore the interpretations from the oldest international legal tribunal, which dates back to 1899. Their expectations make the PCA ruling a focal point for future solutions to the conflict.

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One of the many possible ways to resolve this conflict has now gained prominence.

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This matters because a territorial claim (like any property claim) is worth much more when it is legally recognized by others. Legal recognition means it’s less costly to protect the territory – in money, military might and diplomatic clout. It makes investment more attractive. Even a great power like China would prefer that others recognize its territorial claims.

With the ruling in hand, the Philippines now has a clear negotiating position with which to start any bargaining. That’s not to say that the Philippines is likely to get what it wants anytime soon. The Maryland research team found that the effect of arbitration rulings is strongest when both states are democracies, which China obviously is not. There are few, if any, examples of arbitral rulings in which great powers give in to smaller powers over sovereignty disputes. Moreover, domestic politics matters. China’s leaders face tremendous pressure to nourish nationalist sentiment.

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The Philippines’ clear bargaining position may help, but it could also hurt. If it holds on to the PCA ruling too stringently it may forgo opportunities for peaceful settlement. The ruling could also draw other countries into uncomfortable foreign policy choices between a desire to uphold international law and a desire to appease China.

So, the arbitral ruling could encourage negotiations or it could stir up trouble. But it is not a mere scrap of paper.

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