FORBES: The Philippines Should Sue China For $190.08 Billion USD In South China Sea Rent And Damages

This Monday, May 11, 2015, file photo, taken through a glass window of a military plane, shows China’s alleged on-going reclamation of Mischief Reef in the Spratly Islands in the South China Sea. China’s campaign of island building in the South China Sea might soon quadruple the number of airstrips available to the People’s Liberation Army in the highly contested, environmentally delicate, and strategically vital region. (Ritchie B. Tongo/Pool Photo via AP, File)

The Philippines Should Sue China For $177 Billion In South China Sea Rent And Damages

China owes the Philippines and other countries more than $177 billion in rent and damages for China’s South China Sea fiasco. The Permanent Court of Arbitration found on Tuesday that Mischief Reef is a low-water elevation and within Philippines’ exclusive economic zone. This gives the Philippines’ indisputable legal rights to the reef. But since 1995 when China occupied the reef, China irreparably harmed the reef’s delicate marine ecosystem by dredging and building an artificial island there, including a military garrison and air-strip. By my estimate, China owes the Philippines $12.4 billion in rent and damages for Mischief Reef alone. Considering other Chinese island-building, the country owes the Philippines and other claimant countries more than $177 billion. If China doesn’t want to pay, the Philippines can sue in the courts of the U.S. and other countries where China holds property.

Billing Computation is a separate computation provided by the PesoReserve.com

Here is how to calculate what China owes. In 2015, the U.S. paid $1.97 million to the Philippines for 0.58 acres of coral reef destroyed when the USS Guardian went aground. That is a key reference point for environmental claims. Rent is even more costly. In 1988, the Philippines demanded $1.2 billion from the U.S. in rent for 6 military bases — $200 million each per year in 1988 dollars. The U.S. refused and got evicted.

By those metrics, the Philippines could sue China for about $4.6 billion of environmental damages to Mischief Reef in 2016 dollars, plus the requirement to pay $7.8 billion in rent. If China refuses to pay the combined $12.4 billion, the Philippines could seek redress in foreign civil courts to attach China’s offshore assets — of which there are plenty.

But China is liable for much more.  China occupied six additional features in 1988 in the Spratley’s claimed by the Philippines, plus Scarborough Shoal in 2012.

The Philippines did not resist because they justifiably feared violence on the part of China. In 1988, Vietnam claims that China killed 64 Vietnamese soldiers who resisted on Johnson South Reef in the Spratley’s. China disputes the claim, but according to historian and BBC reporter Bill Hayton, “Strangely, a propaganda film released by the Chinese Navy in 2009 to celebrate the navy’s 60th anniversary gives more credence to the Vietnamese version. The video, now available on YouTube, was shot from one of the Chinese ships and shows the Vietnamese force standing knee deep in water as the tide rises over the reef. Huge spouts of water then erupt around the Vietnamese troops as the Chinese ships open fire. Within seconds the thin line of men has completely disappeared and 64 lie dead in the water: the machine guns are Chinese and the victims Vietnamese. The Chinese won the battle of Johnson Reef with a turkey shoot.”

China occupied six features within Philippines’ claim in 1988: Hughes Reef, Johnson South Reef, Gaven Reef, Subi Reef, Fiery Cross Reef, and Cuarteron Reef. China has since dredged and built on all these reefs. Based on Philippines’ 1988 demand for rent from the U.S., each of these six features should yield (in 2016 dollars) about $10.3 billion for 29 years of use — a total of $62 billion.

China occupied Scarborough Shoal in 2012, but has not yet built there. There are no known environmental damages to the shoal, but rent for five years should be about $1.8 billion (inclusive of 2012 and 2016).

By my count, and including the $7.8 billion in rent for Mischief Reef, China owes the Philippines about $71.6 billion in rent for occupation of all 8 China-occupied features in the Philippines’ claimed part of the South China Sea.

In addition, the Court found that China destroyed a total of 48 square miles in the South China Sea through illegal dredging and artificial island building. Based on the $1.97 million paid by the U.S. to the Philippines in 2015 for the grounding of the USS Guardian, an international court could levy a $105 billion fine on China for ecological destruction of all 48 square miles, payable to the Philippines and other claimant states.

Should China refuse to pay, the Philippines and other claimants can bring civil suits in the U.S. and any other locations where China holds substantial assets. The total levy on China for rent on Philippine-claimed features, plus ecological damage to the entire South China Sea, should be about $176.6 billion: double Philippines’ annual GDP, and about a third of China’s GDP. That doesn’t include rent payable to other claimants, which should also be paid.

When China vacates its artificial islands in the South China Sea and pays this fine, plus rent to other claimants and any additional payments to the families of those killed, most attentive citizens will consider justice to have been done. Until then the international ruling in favor of the Philippines, as China has said, is just a sheet of paper. - FORBES

Anders Corr

CONTRIBUTOR

I worked in military intelligence for five years, including on nuclear weapons, terrorism, cyber-security, border security, and counter-insurgency. I covered and visited Asia and Europe, and worked in Afghanistan for one and a half years. I have a Ph.D. in Government from Harvard University, and a B.A. and M.A. in international relations from Yale University (Summa cum laude). My company, Corr Analytics, provides political risk analysis to commercial, non-profit, and media clients, and publishes the Journal of Political Risk. I am editing a series on the South China Sea conflict, and have covered and visited Africa, the Middle East and Latin America.

The author is a Forbes contributor. The opinions expressed are those of the writer.

I cover international politics, security and political risk.

Follow me on Twitter @anderscorr. If you have any additional information related to this article, contact me at corr@canalyt.com.

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CHINA already "GAVE UP" South China Sea rights after signing UN treaty, Chuck Hagel says

West Philippine Sea & South China Sea Map. Source: Newstarget.com

Beijing gave up South China Sea rights after signing UN treaty, Chuck Hagel says

Beijing gave up its rights to the South China Sea after signing up to a United Nations convention, a former U.S. Defense Secretary said Wednesday, a day after an international tribunal ruled that China's claims of historical rights over the disputed waters were not founded on evidence.

A tribunal at the Permanent Court of Arbitration in The Hague, Netherlands, decided on Tuesday that China's claims to the disputed waters were counter to international law.

The Philippines had contested China's expansive territorial claims in the South China Sea, which Manila contended were invalid under international law.

China, however, said its historic rights predated the United Nations Convention on the Law of the Sea (UNCLOS) and were not at odds with the provisions of the treaty , to which both countries were signatories.

But the East Asian giant relinquished those rights when it signed the UNCLOS, former U.S. Secretary of Defense, Chuck Hagel said.

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"(It) explicitly states in that treaty and when you sign that treaty, you would and do relinquish all previous historical rights to any contested territory. So China essentially put itself in this position to be part of whatever the international tribunal comes down with," Hagel told CNBC's "Squawk Box".

"(The tribunal) is one of the most important post World War II institutions that has been set up to try to bring some order to a world that had gone without any order which lead to two world wars. I think it's important that we continue not only to maintain, but to support the force of those international tribunals," he added.

The Philippines wasn't the only big winner in a legal decision on rights to the resource-rich South China Sea, according to experts.

Malaysia, Vietnam and Indonesia are also set to benefit from the ruling, which dealt a painful blow to China's national pride

The Hague found the so-called 'nine-dash line' — a rough demarcation that China uses to set out what it believes is its territory—was illegal when applied to the Philippines, that meant it was also illegal when applied to other countries, added Paul Reichler, a partner at Foley Hoag and lead lawyer for the Philippines in the case.

"They are big winners as well," Reichler told CNBC's "The Rundown."

Hagel concurred with that assessment.

"This decision by the Hague really gives all those countries in that part of the world the high ground here and has isolated China. China has to pay attention to how other nations in the world are viewing this and will view them (the Chinese)," said Hagel, who described the ruling as "critically important."

China has said repeatedly that the arbitration tribunal had no real jurisdiction on the matter and that it would not abide by its decision.

Both Hagel and Reichler called for cool heads.

"This certainly isn't the end of the story," Reichler said. "When passions calm and different parties truly consider what's in their best interest, all parties will come to the conclusion that these disputes have to be resolved peacefully through diplomatic negotiations, whether it's bilateral or multilateral."

Regarding talks that China and Philippines may talk one-on-one on a deal, Hagel said the U.S. did not want to see "further escalation here by anyone."

U.S. is seeking to maintain "freedom of navigation" in the region for its ships, including military ships.

Noel Celis | AFP | Getty Images

"Freedom of navigation is absolutely critical; when a nation starts to threaten that in any way, that's very, very serious…. We don't want an over-reaction to this but we've got to be very clear with our allies and our friends in that area that (freedom of the seas) is not negotiable," said Hagel.

The real impact of Tuesday's ruling was that it clearly established the rights and obligations of the various parties involved, Reichler said.

"The Philippines succeeded in establishing that it enjoys the rights, guaranteed by the U.N., to an exclusive economic zone, in which it alone can enjoy the resources."

President Xi Jinping's administration reiterated his country's stance in an official statement after Tuesday's decision. Because China was the first to have discovered, named and explored the 1.4 million-square mile body of water, it had a right to establish territorial sovereignty, the statement said, added that the country was willing to continue resolving disputes peacefully through negotiations.

There is precedence if China wished to ignore The Hague's decision, although Reichler said that that would be an ill-advised move.

In 1986, the U.S. ignored the International Court of Justice's ruling regarding a spat with Nicaragua.

The Central American country had accused Washington of supporting Nicaraguan Contra rebels in an effort bid to undermine the country's socialist government, but the U.S. largely boycotted the proceedings, stating the court had no jurisdiction. It later vetoed a United Nations Security Council resolution that demanded Washington adhere to the ruling.

It was only in 1988, when U.S. Congress voted to terminate all support for the Contras that a settlement was ultimately reached.

"China can't thumb their nose at this," Reichler said. "It's not good practice to follow someone else's bad example. It was a great stain on the U.S. when it refused to honor the Nicaragua ruling. – CNBC

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