The recent South China Sea arbitration, being a landmark case, has cited the Larsen v. Hawaiian Kingdom case as one of the international precedents on “indispensable third parties” along with the Monetary Gold Removed from Rome in 1943 case and East Timor case in its Arbitral Award on Jurisdiction and Admissibility (paragraph 181). This is a significant achievement for the Hawaiian Kingdom in international law.
On July 12, 2016, the Arbitral Tribunal in the South China Sea Arbitration (The Republic of the Philippines v. the People’s Republic of China), established under the auspices of the Permanent Court of Arbitration (PCA), issued its decision in The Hague, Netherlands. The decision found that China’s claims over manmade islands in the South China Sea have no legal basis. Its decision was based on the definition of an “island” under the United Nations Convention on the Law of the Sea (1982) (Convention).
According to Article 121(3) of the Convention, an island must “sustain human habitation or economic life of [its] own” in order to generate maritime zones, i.e., the exclusive economic zone (EEZ) of 200 miles from its coast. Therefore, China’s creation of islands were never islands to begin with but rather reefs or rocks, which precluded China from claiming any maritime zones. For background of the dispute visit the New York Times “Philippines v. China, Q. and A. on South China Sea.”
At first glance, it would appear that China contested the jurisdiction of the Arbitral Tribunal in a Position Paper it drafted on December 7, 2014, and on this basis refused to participate in the proceedings held at the PCA in The Hague, Netherlands. So how is it possible that the Arbitral Tribunal pronounces a ruling against China when it hasn’t participated in the arbitration?
The simple answer is that the Arbitral Tribunal could issue a ruling because China “did” participate in the proceedings and has consented to PCA’s authority to establish the Tribunal by virtue of the UN Convention on the Law of the Sea (1982). As noted in the PCA’s press release, the PCA currently has 12 other cases established under Annex VII of the Law of the Sea Convention. China is a State party to the UN Convention on the Law of the Sea, and arbitration is recognized as a means to settle disputes under Annex VII.
As a State party to the Convention, China consented to arbitration even if it chose not to participate, but it did signify its participation when it made its position public regarding the arbitration proceedings. According to the Arbitral Tribunal in its Arbitral Award on Jurisdiction and Admissibility, it stated in paragraph 11, “the non-participation of China does not bar this Tribunal from proceeding with the arbitration. China is still a party to the arbitration, and pursuant to the terms of Article 296(1) of the Convention and Article 11 of the Annex VII, it shall be bound by any award the Tribunal issues.”
What is not commonly understood is that there are two matters of jurisdiction in cases that come before the PCA. The first is “institutional jurisdiction” of the PCA, and the second is “subject matter jurisdiction” of the Arbitral Tribunal over the particular dispute.
As an intergovernmental organization established under the 1899 Hague Convention, I, and the 1907 Hague Convention, I, the PCA facilitates the creation of ad hoc Arbitral Tribunals to settle disputes between two or more States (interstate), between a State and an international organization, between two or more international organizations, between a State and a private entity, or between an international organization and a private entity (United Nations Dispute Settlement, Permanent Court of Arbitration, p. 15). Disputes must be “international” and not “municipal,” which are disputes that go before national courts of States and not international courts or tribunals.
An explanation of the PCA’s institutional jurisdiction is also provided in the South China Sea case press release. On page 3 the press release the PCA states, “The Permanent Court of Arbitration is an intergovernmental organization established by the 1899 Hague Convention on the Pacific Settlement of International Disputes. The PCA has 121 Members States. Headquartered at the Peace Palace in The Hague, the Netherlands, the PCA facilitates arbitration, conciliation, fact-finding, and other dispute resolution proceedings among various combinations of States, State entities, intergovernmental organizations, and private parties.” China became a member State of the PCA on Nov. 21, 1904, and the Philippines on Sep. 12, 2010.
The “institutional jurisdiction” was satisfied by the PCA because both the Philippines and China are States, which makes it an interstate arbitration, and both are parties to the UN Convention on the Law of the Sea, which under Annex VII provides for arbitration of disputes under the Convention. It was under this provision that the PCA could establish the Arbitral Tribunal.
The first matter that the Tribunal had to address was whether it had “subject matter jurisdiction” over the dispute, which it found that it did. In paragraph 146 of the Arbitral Award, the Tribunal stated, “China’s Position Paper was said by the Chinese Ambassador to have “comprehensively explain[ed] why the Arbitral Tribunal…manifestly has no jurisdiction over the case.” In its Procedural Order No. 4, para. 1.1 (21 April 2015), the Tribunal explained, “the communications by China, including notably its Position Paper of 7 December 2015 and the Letter of 6 February 2015 from the Ambassador of the People’s Republic of China to the Netherlands, effectively constitute a plea concerning this Arbitral Tribunal’s jurisdiction for the purposes of Article 20 of the Rules of Procedure and will be treated as such for the purposes of this arbitration.”
In this initial phase of jurisdiction, the Tribunal, however, also had to deal with the rule of “indispensable third parties” which applied to States that are not participating in the arbitration and whose rights could be affected by the Tribunal’s decision. These States were Viet Nam, Malaysia, Indonesia and Brunei. This rule would not apply to China since the Tribunal recognized China’s participation. Paragraph 157 of the Arbitral Award addressed the indispensable third-party rule, i.e. Viet Nam, which states, “The Tribunal noted that this arbitration differs from past cases in which a court or tribunal has found the involvement of a third party to be indispensable. The Tribunal recalled that ‘the determination of the nature of and entitlements generated by the maritime features in the South China Sea does not require a decision on issues of territorial sovereignty’ and held accordingly that ‘[t]he legal rights and obligation of Viet Nam therefore do not need to be determined as a prerequisite to the determination of the merits of the case.'”
In other words, the Tribunal was going to determine in accordance with the UN Convention on the Law of the Sea, whether or not the reefs and rocks in the South China Sea constitute the definition of islands as defined under the Convention, which would determine whether or not it had a territorial sea of 12 miles and an EEZ (Exclusive Economic Zone) of 200 miles. It would not be determining matters of sovereignty over the islands. If they weren’t islands, but rather reefs or rocks, then China’s claims to a territorial sea and an EEZ would become irrelevant. The Arbitral Award determined that they were not islands as defined under the UN Convention on the Law of the Sea.
Of importance in these proceedings is that the Larsen v. Hawaiian Kingdom was specifically referenced in the Award on Jurisdiction in paragraph 181, which was also referenced in the Arbitral Award, paragraph 157, footnote 98. In the Award on Jurisdiction, the Tribunal stated, “The present situation is different from the few cases in which an international court or tribunal has declined to proceed due to the absence of an indispensable third-party, namely in Monetary Gold Removed from Rome in 1943 and East Timor before the International Court of Justice and in the Larsen v. Hawaiian Kingdom arbitration. In all of those cases, the rights of the third States (respectively Albania, Indonesia, and the United States of America) would not have been affected by a decision in the case, but would have ‘form[ed] the very subject matter of the decision.’ Additionally, in those cases the lawfulness of activities by third States was in question, whereas here none of the Philippines’ claims entail allegations of unlawful conduct by Viet Nam or other third States.”
In the Larsen case, the PCA exercised its “institutional jurisdiction” when it convened the Arbitral Tribunal, because it recognized that the Hawaiian Kingdom is a “State” in a dispute with a Hawaiian subject who was a “private entity.” Like the South China Sea case, once the Tribunal was convened, it had to address whether or not it had subject matter jurisdiction over the dispute between Larsen and the Hawaiian Kingdom, because of the fact that the United States was not a party.
This dispute was specifically stated in the arbitration agreement that the PCA based its institutional jurisdiction. Paragraph 2.1 of the Arbitral Award states, “(a) Lance Paul Larsen, Hawaiian subject, alleges that the Government of the Hawaiian Kingdom is in continual violation of its 1849 Treaty of Friendship, Commerce and Navigation with the United States of America, and in violation of the principles of international law laid [down] in the Vienna Convention on the Law of Treaties, 1969, by allowing the unlawful imposition of American municipal laws over claimant’s person within the territorial jurisdiction of the Hawaiian Kingdom; (b) Lance Paul Larsen, a Hawaiian subject, alleges that the Government of the Hawaiian Kingdom is also in violation of the principles of international comity by allowing the unlawful imposition of American municipal laws over the claimant’s person within the territorial jurisdiction of the Hawaiian Kingdom.”
What was at the center of the dispute was the unlawful imposition of American municipal laws within the territory of the Hawaiian Kingdom. The Tribunal was not established to determine whether or not the Hawaiian Kingdom exists as a “State,” which was already recognized by the PCA prior to establishing the Tribunal under its mandate of ensuring it had “institutional jurisdiction” in the first place.
According to the American Journal of International Law (vol. 95, p. 928), “At the center of the PCA proceeding was…that the Hawaiian Kingdom continues to exist and that the Hawaiian Council of Regency (representing the Hawaiian Kingdom) is legally responsible under international law for the protection of Hawaiian subjects, including the claimant. In other words, the Hawaiian Kingdom was legally obligated to protect Larsen from the United States’ ‘unlawful imposition [over him] of [its] municipal laws’ through its political subdivision, the State of Hawaii. As a result of this responsibility, Larsen submitted, the Hawaiian Council of Regency should be liable for any international law violations that the United States committed against him.” If the Hawaiian Kingdom did not exist as a State, the PCA would not have established the Arbitral Tribunal to address the dispute.
In these proceedings, however, the Council of Regency was attempting to get the Tribunal to pronounce the existence of the Hawaiian Kingdom and even try to see if the Tribunal could issue some interim measures of protection. This was deliberately done to show that the Hawaiian Kingdom was taking affirmative steps, even during the proceedings, to do what it could in addressing the unlawful imposition of American municipal laws within Hawaiian territory, which led to Larsen’s unfair criminal trial and subsequent incarceration.
In the Arbitral Award, the Tribunal concluded that the United States was an indispensable third party. In paragraph 12.5, the Tribunal explained, “It follows that the Tribunal cannot determine whether the [Hawaiian Kingdom] has failed to discharge its obligation towards [Lance Larsen] without ruling on the legality of the acts of the United States of America. Yet that is precisely what the Monetary Gold principle precludes the Tribunal from doing. As the International Court of Justice explained in the East Timor case, ‘the Court could not rule on the lawfulness of the conduct of a State when its judgment would imply an evaluation of the lawfulness of the conduct of another State which is not a party to the case.'” It is clear that the Tribunal recognized the Hawaiian Kingdom as a “State” and the lawfulness of its conduct, and the United States as a “third State” and the lawfulness of its conduct.