Oil and polemics do not mix (1)

The Philippines and China have begun preliminary talks on oil and gas development in the South China Sea (SCS). This triggered a familiar mix of reactions—optimism, caution, and skepticism.

The more instinctive reaction, however, is to take stock of past attempts at some form of cooperative arrangement with China in SCS. For this purpose, the 2016 SCS Arbitral Award provides clear frames of reference.

First, it recognized that in the area of Spratly Islands are numerous disputed rocks with enclaved 12 nautical miles territorial sea (TS) and territorial seabed (TSB). It did not decide title to these territories.

Second, it declared that only the Philippines has sovereign right to the exclusive economic zone (EEZ) and continental shelf (CS) consisting of the waters lying beyond the TS and TSB of those disputed rocks that are situated within 200 nautical miles from the archipelagic baselines.

Third, it acknowledged lack of jurisdiction over delimitation issues, such as the EEZ and continental shelf overlaps between the Philippines and Taiwan/China in the northwestern area and the Philippines and Malaysia in the southwestern area of the SCS.

In 2005, China National Offshore Oil Corp., Vietnam Oil and Gas Corp., and Philippine National Oil Company entered into a Joint Marine Seismic Undertaking (JMSU), with the approval of their respective governments. Under the JMSU, the parties agreed to engage in “joint research of petroleum resource potential through the collection and processing/reprocessing of 2D and/or 3D seismic data.”

In 2018, then Philippine Foreign Affairs Secretary Teodoro Locsin Jr. and Chinese Foreign Minister Wang Yi entered into a memorandum of understanding (MOU), whereby the parties agreed on the guiding principles and working mechanism for negotiating “arrangements to facilitate oil and gas exploration and exploitation in relevant maritime areas.”

Both failed. In 2022, Locsin dramatically announced that negotiations under the MOU had “got as far as it is constitutionally possible to go” as further negotiations would plunge us “into [a] constitutional crisis.” In 2023, the Supreme Court nullified JMSU for violation of the regalian doctrine and national patrimony clause purportedly under Article XII, Section 2 of the 1987 Charter (Ocampo v Arroyo).

Their underlying premise is that the regalian doctrine and national patrimony clause apply to petroleum resources in the EEZ and CS. This has been echoed by a group objecting to the ongoing talks.

Under the regalian doctrine, the Philippines owns all underlying petroleum resources within its territory, including those that are undiscovered and unextracted. The national patrimony clause provides that enjoyment of these resources are reserved for the Filipino people. Petroleum exploration shall be undertaken either directly by the government or indirectly through a Filipino citizen or a corporation at least 60 percent of whose capital is owned by Filipino citizens. Foreign-owned corporations may provide technical or financial assistance based on an agreement with the president and the consensus of Congress.

However, the Constitution, including the regalian doctrine and national patrimony clause, apply only to the land territory, internal waters, archipelagic waters, territorial airspace, TS, and TSB, for its enactment is a function of territorial sovereignty. Its provisions have no force in the Philippine EEZ and CS, despite the Supreme Court’s repeated conflation of the EEZ with the territorial sea (Ocampo v Arroyo, 2023; Republic v. Palawan, 2018; and Magallona v Ermita, 2011).

A plethora of international jurisprudence, from Franconia case, 1876, to Nicaragua v Colombia, 2022, has consistently held that the EEZ and CS are outside a state’s territory. In the SCS arbitration, the Philippines acknowledged that its EEZ and CS are not part of its territory; otherwise, the tribunal would have declined to exercise jurisdiction.

Within its territory, the Philippines has dominion over all petroleum resources, even those that are undiscovered and unextracted, because it owns the land territory and TSB. It has no such dominion in the continental shelf for it does not own the seabed and subsoil therein. It only has sovereign rights to regulate exploratory vessels navigating the EEZ, to drill the continental shelf’s seabed and subsoil, and to take ownership of petroleum resources, including the power to tax, that have been brought up to the wellhead.

Even the laws of physics defy the regalian doctrine in the continental shelf. Being fluid and fugacious, petroleum resources are exploitable by two or more states across maritime zones or boundaries. This is called the rule of capture in the international context. As ownership of petroleum resources vests only upon extraction, the state that produces them is deemed the owner even if they migrated from beneath another state’s continental shelf. The rule of capture compels cooperation.

Thus, the regalian doctrine is not an obstacle to negotiations with China, Vietnam, or Malaysia, regarding oil and gas cooperation affecting the Philippine EEZ and CS in the SCS.

—————-

Melissa Loja and Romel Bagares are independent Filipino scholars of international law.