In a landmark ruling, the U.N. arbitration court is dismissing China's territorial claims in the South China Sea, saying it has "no historic title" to the vast maritime region.
Tuesday's ruling by the Hague-based Permanent Court of Arbitration answers a complaint brought by the Philippines in 2013 that accused Beijing of violating the U.N. Convention on the Law of the Sea (UNCLOS) with its aggressive actions on the Scarborough Shoal, a reef located about 225 kilometers off the Philippine coast.
Chinese President Xi Jinping rejected the ruling and said "China's territorial sovereignty and maritime interests in the South China Sea" will not be affected. China's foreign ministry said on its website, "The award is null and void and has no binding force."
The court said Beijing's claim of virtual sovereignty over nearly all the South China Sea under a so-called "nine-dash line" runs contrary to UNCLOS, which sets a country's maritime boundaries 22 kilometers from its coast, and control over economic activities up to 370 kilometers from its coast. The court ruled China had violated Manila's sovereign rights by interfering with Philippine fishing and oil exploration activities in the area.
In Manila, Philippine Foreign Secretary Perfecto Yasay called the ruling "a milestone decision" in a press conference moments after the announcement. Yasay said the ruling makes "an important contribution" to resolving the ongoing maritime disputes, and urged all parties "to exercise restraint and sobriety." New Philippine President Rodrigo Duterte has called for bilateral negotiations to resolve the controversy.
U.S. State Department spokesman John Kirby called the ruling "an important contribution to the shared goal of a peaceful resolution to disputes in the South China Sea."
China had boycotted the proceedings at the court, saying the body has no jurisdiction over the dispute, and insists it will not accept, recognize or implement any ruling on the South China Sea, despite being a signatory to UNCLOS along with the Philippines. In a statement issued just hours before The Hague panel announced its decision, a spokesman for China's foreign ministry said it would not accept "any so-called material" from the court.
Analysts said the court ruling is a significant decision in favor of the Philippines.
Ernest Bower with the Washington-based Center for Strategic and International Studies said, "China now faces reality that if it continues to assert, through actions and words" its claims in the region, "it is breaking the law."
Amarjit Singh, a senior consultant at the British think tank IHS, said the ruling "undermines China's claims in the South China Sea and potentially limits China's negotiating stance" with other countries that have also asserted claims there, including, Brunei, Malaysia, Taiwan and Vietnam.
State media Xinhua and online netizens expressed strong dissatisfaction the ruling. A Weibo user said in his posting that “We should unite behind the country’s claim and make no concessions on the South China Sea dispute even if we have to go to war,” while another user said “China should show no fear for any future economic sanction” shall China decide not to comply with the order.
In its harsh-worded editorial, Xinhua even lambasted the international arbitration court to be “the source of chaos.”
Meanwhile, the ruling is coming in the midst of the two-day EU-China bilateral talks, which began in Beijing on Tuesday. The EU advised China to stick to rules and abide by the ruling. German think tank, Mecator, said the EU would never grant China's request for a Market Economy Status if Beijing defies the court decision.
An estimated $5 trillion in global trade passes each year through the South China Sea, which is home to rich fishing grounds and a potentially vast wealth of oil, gas and other natural resources.
About 100 demonstrators marched outside the Chinese consulate in Manila, calling on Beijing to relinquish the Scarborough Shoal, shouting "Chexit Now" - a play on the term coined for Britain's controversial push to leave the European Union.
WATCH: Protest in Manila against China
China has launched a massive land seizure and rebuilding effort throughout the South China Sea in recent years, transforming numerous reefs into artificial islands that can support military installations, all the while ignoring competing claims over the region by Brunei, Malaysia, Vietnam and Taiwan, as well as the Philippines.
The Hague court also ruled Tuesday that none of the Spratly Islands granted China an exclusive economic zone, and that its construction activities on Mischief Reef caused "irreparable harm" to the reef's ecosystem.
Enforcement of ruling
Despite Tuesday's ruling, the United Nations has no mechanism to enforce the decision, either through military action or economic sanctions. But it could prompt China's other Asia-Pacific rivals to also file suit, putting increased diplomatic pressure on Beijing to reduce its presence in the South China Sea.
The United States has also challenged Beijing's increasing aggressiveness in the region, holding a number of naval exercises and deploying warships near the rebuilt reefs to assert the international freedom of navigation rules.
WATCH: South China Sea Dispute - What You Need To Know
- What's behind the dispute?
China claims nearly the entire 3.5 million square-kilometer South China Sea, based on its so-called "nine-dashed line," which it says is based on ancient maps. China's claims overlap with not only the Philippines, but also Brunei, Malaysia, Vietnam and Taiwan. Some of the disputes stretch back decades or even centuries. But tensions have worsened in recent years, as Beijing has moved to assert its control over the territory.
Who brought the case against China?
The Philippines filed the case against China at the Permanent Court of Arbitration in the Hague in January 2013. Manila argues Beijing's territorial claims and recent aggressive activities in the South China Sea violate the United Nations Convention on the Law of the Sea (UNCLOS), an international treaty both nations have ratified.
China refuses to participate in the tribunal, arguing it has no obligation to do so under UNCLOS. Beijing has also repeatedly insisted it will not recognize what it predicts will be a biased ruling. In the meantime, China has continued to build artificial islands and military outposts in the contested waters, in an attempt to create "facts on the ground."
- What exactly did the court consider?
The Philippines brought a total of 15 complaints against China. The most significant is complaint number two, which claims China's "nine-dash line" is contrary to UNCLOS. So far, the court has not determined it has jurisdiction to rule on that complaint.
Instead, the tribunal announced late last year it would tackle seven other critical issues. These included complaints challenging specific Chinese activities around particular locations. It is also expected to officially categorize various land features as either rocks, islands, or low tide elevations - labels that would affect the rights of whoever owns the territory.
Is the ruling binding?
Technically, yes. But in reality, UNCLOS has no way to enforce its rulings, since it does not have a police force, an army or a way to impose sanctions on those who ignore its decisions. Some analysts have speculated that the matter could be taken to the U.N. Security Council, but China and Russia, which are permanent members, would inevitably veto any action there.
- If the ruling is not enforceable, why does it matter?
If, as expected, the court rules at least partially in the Philippines' favor, it could put important diplomatic pressure on China. It could also provide an important symbolic victory for Asian leaders who say Beijing is ignoring international law as it seeks to assert its power in the region.
A ruling against China would also set an important legal precedent and become part of international law. It could also encourage other countries who have territorial disputes with China to take similar legal action.
- What is the U.S. stance on the dispute?
The U.S. says it takes no official position on China's various territorial disputes. But top officials have repeatedly criticized China's actions in the South China Sea and have urged China to accept the court's eventual ruling. However, any U.S. efforts to publicly shame Beijing may be limited by the fact that Washington itself has refused to ratify UNCLOS.
So what's next?
China's next move is uncertain. Some have said it may withdraw in protest from the UNCLOS treaty system. But that can only be done with a year's notice, allowing other nations plenty of time to file last-minute cases. The move also may reinforce a perception that Beijing does not want to play by the established rules of international order.
China says it prefers to solve territorial disputes through direct negotiations, but has taken no meaningful steps toward holding talks. Instead, Beijing is seemingly content to let the disputes play out as it continues building in the disputed areas.
- Will anything change under the Philippines new president?
The Philippines' incoming president, Rodrigo Duterte, says he is open to bilateral talks with China if the standoff is not resolved in two years. That represents a policy difference from his predecessor, Benigno Aquino, who took a hardline stance on the territorial dispute.
But Duterte also made it clear this week he does not intend to give up much ground, saying the disputed territory "is ours," and telling China: "You have no right to be there." The tough-talking politician has also threatened to personally ride a jet ski to one of the disputed islands to stake his country's claim.
A lot of money, and a lot of national pride. More than $5 trillion in trade passes through the South China Sea every year. The area is also home to vital fishing grounds and is thought to contain vast natural gas and oil deposits. Political leaders in many claimant countries have also exploited the issue to rouse nationalistic sentiment.
William Gallo and Richard Green, Saibal Dasqupta and Joyce Huang contributed to this report