Photo from Gazette Review by Lindsey Burrows

Joint development of maritime resources is hailed as a feasible approach between countries that are locked into overlapping boundaries or maritime claims. The term “joint development” is loosely used as simply referring to developing and exploiting resources together. As an international practice, joint development is in line with the United Nations Law of the Sea (UNCLOS) wherein states, pending agreement of delimitation of boundaries or continental shelf, shall make an effort to enter into provisional arrangements of a practical nature which shall be without prejudice to the final delimitation.

Joint development has been conducted all over the world, including East Asia, by disputing countries such as Japan and South Korea, Thailand and Malaysia, Malaysia and Vietnam, and Australia and Timor-Leste. Even the Philippines moved in the direction of exploring joint development together with China and Vietnam in the South China Sea from 2005-2008, through the so-called Joint Marine Seismic Undertaking or JMSU.

Nine years after the expiration of the JMSU, the Duterte administration is trying to pursue joint cooperation on oil exploration anew. In President Rodrigo Duterte’s State of the Nation Address (SONA) on July 24, 2017, he reiterated that he is open to joint development in the South China Sea. In recent months, the Philippine Department of Energy has been working with the Department of Foreign Affairs in order to lift the moratorium on all exploration and drilling work in the disputed area that had been issued by the Aquino administration amid rising tension with China. With the Philippines’ current domestic oil production gradually running out, access to oil-rich areas in our EEZ now seems to be in our best interest.

A joint development arrangement will allow claimant countries to set aside the sovereignty aspect of the dispute and exploit resources available in the disputed areas, which otherwise they wouldn’t have access due to competing claims. However, joint development usually entails complex arrangements; as an international practice it involves several elements, and must be accompanied by certain conditions in order to protect greater national interests of the parties concerned.

Joint Development (JD): Concept and implications

Based on the actual practice of joint development (JD) among disputing countries, JD refers to arrangements in an overlapping maritime area claimed by two or more states, to develop and share resources (fisheries, oil or minerals) found within that defined area.1 This happens in areas with boundaries that have not yet been defined, or to which two states are entitled under international law.2 It must be emphasized that joint development can only be agreed upon with reference to an area that parties agree to be disputed.

When the Philippines, in 2013, filed a case at the Hague for arbitration against China’s violations of Philippine maritime entitlements, the Arbitral Tribunal ruled in favor of the Philippines. It declared China’s nine-dash line as without legal basis, and clarified the limited maritime entitlements of specific geographic features in the West Philippine Sea that were occupied. It ruled that China violated the Philippine sovereign rights by exploiting resources within Philippine EEZ.

Under UNCLOS, which was ratified by 168 parties including China and the Philippines, Philippine EEZ is properly defined and is clearly not disputed with China, as there are no overlaps. With the arbitration ruling having clarified that China’s nine-dash line has no legal basis, as long as we are talking about areas within the Philippine EEZ under the UNCLOS framework, we cannot pursue ‘joint development,’ because the element of having ‘disputed areas’ is missing. Using this simple understanding of the concept, pursuing JD will strengthen China’s claim and weaken that of the Philippines. China’s claim to the so-called nine-dash line is based on historic rights. The coordinates of this claim up to now remain undefined yet the line encompasses almost the whole of the South China Sea. The Philippines’ claim, however, is anchored on international law and now underpinned by the arbitral ruling. This would mean that pursuing joint development with China will mean disregarding the arbitration ruling and recognizing that China’s nine-dash line claim overlapping with that of the Philippines is valid, thus making the area within Philippine EEZ ‘disputed’.

Furthermore, JD can only be pursued as an option if the current desire to exploit the resources in an area is greater than the current commitment to winning a boundary or territorial dispute. This would mean that claimant countries are willing to freeze their sovereignty claims in the disputed area in order to both benefit from the lying resources. Because JD, by its very nature, does not prejudice future boundary delimitation initiatives, it makes it easier to shelve other aspects of a dispute.

At a broader level, a core interest of China is the survival of its Communist Party; that means avoiding policies that would trigger strong public dissent and nationalists within the government trying to destabilize Party leadership. Strong nationalistic comments by People’s Liberation Army (PLA) officials on the South China Sea, growing rhetoric describing the South China Sea as one of China’s core interests, and eruption of protests in China when the arbitral ruling came out all mean that it would be far from easy for China to step back from its nine-dash line claim in order to pursue joint development with the Philippines. If anything, its insistence on pursuing joint development is a way of asserting its nine-dash line claim on areas which overlap with Philippine EEZ. It is more likely to keep asserting sovereignty over the area in order to manage nationalistic sentiments.

China’s actions support this assertion. In the past few months, it has continued militarization moves in its occupied features as well as maintained strategic presence of its military vessels in the area. In Scarborough shoal, although the Chinese have already allowed Filipino fishermen to fish around the shoal without harassment, Chinese vessels guard the entrance of the lagoon, preventing its use as a shelter in the event of typhoons. Last August 2017, some Philippine officials were alarmed by China’s deployment of navy vessels, coast guard ships, and a flotilla of fishing boats in Sandy Cay, which is within Pagasa Island’s territorial waters. Furthermore, during the ASEAN Summits in 2016 and 2017, there were allegations that China influenced some ASEAN countries to dilute the Chairman’s statement so as to avoid mention of the arbitration ruling and China’s reclamation of islands.

The prospect of joint development is moreover marred by bad experiences with respect to the trilateral deal with China and Vietnam within Philippine EEZ as part of JMSU. JMSU was the first resource cooperation agreement entered into by claimant states in the South China Sea disputes. However, the JMSU became controversial after it was linked to other Philippines-China deals discovered to have been tainted with corruption. This resulted in the Arroyo government’s suspension and intense scrutiny of all-Chinese funded projects. Filipinos thus became more wary of dealings with the Chinese, as the Aquino administration distanced itself from China.

Even today, it may take a huge amount of political capital by both sides to restart talks on a similar deal under anticipated public scrutiny. This is something that the Duterte administration might however have certain advantages in -- given its good relations with China, strong political support in other branches of government, and decreasing yet still ‘good’ public ratings.

What can be done in the meantime

Despite the legal obstacles and prospects of ‘joint development’ being bleak, the future of oil cooperation in the South China Sea is not. What is possible at the present time is to organize a joint venture - a commercial deal between two companies - to explore, develop, and share profits and resources in a designated area. However, if the identified area is within the Philippine EEZ, then the deal should be under Philippine laws and the foreign partner should acknowledge Philippine sovereign rights in the area under UNCLOS – which, as discussed earlier, China may hesitate to do.

There is a joint oil exploration deal in the West Philippine Sea currently being processed by the Department of Energy, which involves the Philippine National Oil Corporation (PNOC), the China National Offshore Oil Corporation (CNOC), and Jadestone Energy Inc. This agreement could result in the lifting of the moratorium on all joint explorations imposed by the Philippine government. The deal is in a non-disputed area, hence there is no question that it will be governed by Philippine laws. Even though the project is not as contentious as other deals, it could serve as a good confidence-building measure and as an example of cooperation between a Philippine state-owned company and its Chinese counterpart.

Moreover, Philippines-China relations has entered a “new chapter”, as President Duterte tips the Philippines closer to China (rather than its traditional ally, the US), resulting in huge amounts of investment pledges by China to the Philippines. In what is called the ‘Golden Age of Infrastructure,’ the Philippines is embarking on large-scale infrastructure projects with the help of China’s economic muscle. This period provides an opportunity to establish a strong foundation for amicable relations between the two countries. The momentum that this cooperation generates, if successful, could improve the atmosphere for tackling future, potentially more contentious, dealings with China.

In the meantime, both sides can help build mutual confidence of their respective stakeholders by making sure that all deals are done through the right processes, upholding transparency. As we have learned from our past experiences with the Arroyo administration, projects, no matter how large the benefit we can reap from it, can easily be undermined by corruption. With China’s increasing influence in the current world order, the best strategy would be to maintain good relations with it while continuing to protect Philippine sovereignty and sovereign rights.

The future of oil cooperation in the South China Sea has yet to unfold. China continues to evolve as a global power in ways beyond most expectations, whereas claimant countries’ foreign policies are also shifting in order to adjust to the changing geopolitical environment. Other factors may emerge soon enough which may nudge oil cooperation forward. In the meantime, however, the Philippines must make sure to protect its non-negotiable long term interests – a big part of which is our territorial and maritime domain.

1 Hazel Fox Et Al., Joint Development Of Offshore Oil And Gas—A Model Agreement For States For Joint Development With Explanatory Commentary 45 (1989)