Belt And Road Initiative by Sea, 19 Dec 2018

The Belt and Road Initiative (BRI) is an effervescent Chinese investment and trade strategy, aiming to connect Asia, Africa and Europe. The 21st Century Maritime Silk Road (MSR), or the “Road” in BRI goes through the South China Sea and Indian Ocean, connecting China with Europe and Africa, and through the South China Sea and the South Pacific Ocean, connecting China with Indonesia, Australasia, and South Pacific island countries.

China’s vision for maritime cooperation was set forth for the first time on 20 June 2017, by President Xi Jinping. With an emphasis on sustainable development, it focuses on marine resource utilization, industry cooperation (in industrial parks for maritime sectors, and economic and trade cooperation zones), maritime connectivity (by building shipping service networks and shipping centres),  transport (by facilitating mutual recognition of customs regulations, or mutual assistance in law enforcement), and information connectivity (by building information networks and exchanges, and ensuring security and coverage).

The MSR Vision unveiled the geographical scope, which consists of three “blue economic passages”:

  1. the first connects the China-Pakistan Economic Corridor and the Bangladesh-China-India-Myanmar Economic Corridor;
  2. the second starts from the South China Sea, and continues into the Pacific Ocean; and
  3. the third passage, aims to reach Europe through the Arctic Ocean.

The blue economic passages reflect the characteristics of economic corridors developed as part of the land route. The concept of economic corridors was introduced by the BRI, distinguishing itself from other initiatives by relying on the network effects of combined bilateral and multilateral agreements. These agreements are concluded in various forms, ranging from MoUs to Free Trade Areas, which facilitate supply chains along areas with deep historical connections, in a unique combination of public and private intervention.[1]

As the initiative involves maritime infrastructure construction among other projects, a close analysis of the law of the sea provisions is necessary. This article aims to clarify the limits and goals of OBOR in the context of UNCLOS and the current policy context. What are the expectations of the Maritime Silk Road or MSR, specifically? Can it achieve what the land Belt cannot?

The MSR has a rich historical background, the earliest accounts dating back to the Qin and Han dynasties, in 221 BC. The Road is a symbol of Chinese internationalism, having contributed to creating an economic and cultural connection between Asia and Europe. The new MSR connects most of the countries which are part of these historic seaways, such as countries from the ASEAN region, Sri Lanka, Greece, Italy, Egypt, Suez, and Kenya.

The seas have traditionally served as a medium for trade and communication and as a valuable pool of resources. Consequently, States have been constantly battling for access and dominance. In order to keep this balance, the law of the sea has been preoccupied with setting the line between the territorial seas, continental shelf or exclusive economic zones (EEZ), and the high seas. As the Road requires access through States’ territories and puts forward plans for maritime infrastructure construction, the rules of the law of the sea, predominantly comprised in UNCLOS, are to be noted.

China has been involved in one of the most well-known recent arbitral decisions. The South China Sea UNCLOS’s Permanent Court of Arbitration (PCA) arbitration, between Philippines and China, has been the source of many criticisms against China. The five-judge tribunal unanimously ruled in favour of Philippines. Noteworthy, the Tribunal rejected China’s historical rights in the South China Sea, and found that China’s fishing and construction activities interfered with Philippines’ EEZs. However, there is a high risk that the award will not be enforceable.

The drafting history of UNCLOS is relevant in understanding China’s stance. Historically, theories considering seas as rex communis, as put forward by Grotius, were supported by European States, which had an interest in expanding and maintaining the navigations routes towards Asia. Developing states from the coastal area were pushing for extensive EEZs of over 200 miles, in order to protect their national interests. In 1973, when China joined the negotiations, the ideology of the Cultural Revolution led it to prioritise national interest, while recognising the support received from the third world countries. At the same time, China was aiming to establish its independence from American and Russian influence.  These considerations led China to support the weaker states’ demand for a more expanded EEZ. This concession led to a conflict with China’s own interests, as recently witnessed by the award in the South China Sea arbitration.

China’s compliance with the award is both an issue of policy and of rule of law. Marking a different stance regarding international law, in opposition to the one taken by the “West”, China and Russia recently (in June 2016) signed a Declaration of their own interpretation of the international system.  The Declaration expressly refers to China’s activities in the South China Sea by referring to the parties’ commitment to the United Nations Convention on the Law of the Sea (“UNCLOS”). The key words of the Declaration are “independence”, “equal footing” and “non-intervention”. This Declaration can be seen as an attempt to legitimise non-compliance with the international law rules. At the same time, it is a reaction to the western hegemony.

However, China’s reaction to the award is not as drastic as feared. Now that it is a leading power, China seems to be aware of scrutiny over its actions. In the speech at the World Economic Forum in January 2017, President Xi emphasised the peaceful resolution of disputes. Also, the Declaration signed with Russia stresses compliance with UNCLOS. In fact, the Chinese government has broadly maintained the status quo, refraining from any aggravation. The likely outcome is that the PCA award will not be enforced per se but will lead to a new stance in either treaty making or treaty interpretation. China released two documents in response to the arbitral decision, a statement of its rights in the South China Sea and a paper on dispute settlement with the Philippines. Both documents refer to historic rights as distinct from UNCLOS rights.

Currently, the Philippines Government is willing to engage in bilateral discussions with China. The desirable outcome in a tense political context is the achievement of a fair and neighbourly relationship. With the entire international community overseeing the evolution of these negotiations, this outcome is highly probable. In this way, China may have found a solution to protect all three principles that were guiding its conduct in the initial negotiations – protection of its interest in the activities conducted in the area, preserving peaceful relations with neighbouring countries and opposing western hegemony.

Most recently, on 18 May 2017, China and the ASEAN States have agreed on a framework of a Code of Conduct in the South China Sea, which is meant to balance the interest of the members of the Association. The code is still under negotiation and no drafts have been published, but the conclusion of a framework marks significant progress in the settlement talks.

However, recently, China has been planning to amend its 1984 Maritime Traffic Safety Law, scheduled to be implemented in 2020. As announced in the 13th Five Year Plan (covering the 2016-2020 period), China is seeking a new model to coordinate the oversight of maritime affairs, which would include restrictions on the access of foreign vessels in territorial waters. This would be at odds with the UNCLOS provisions on the freedom of transit.

Clarity is also needed in terms of the limits of business development that such an Initiative supports. Although the Chinese resistance to an established framework, UNCLOS, does little in this regard, there are intense diplomatic activities aiming to alleviate any concerns. Moreover, AIIB, the China backed development bank, is particularly active in the area as cross-country connectivity through maritime routes, particularly in South Asia, South East Asia and the Middle East, is one of its priorities. The Philippines joined the AIIB at the end of 2016 and is aiming to obtain loans up to USD 500 million to fund its projects. In Sri Lanka, the AIIB is funding the development of Colombo port city with an investment of USD 1.4 billion. In Oman, AIIB approved a project to develop the Duqm port by improving transport efficiency and mineral exports as part of the Duqm Special Economic Zone.

Most importantly, China has announced a USD 57 billion investment plan for the Gwadar port and free zone, an essential trade hub for the China Pakistan Economic Corridor (CPEC). Also, the UNSC has recently recognised OBOR, and CPEC in particular, in a resolution issued on 17 March 2017, showing the international consensus on recognising the Initiative. Other important projects include the currently under negotiation USD 24 billion project for the port of Colombo in Sri Lanka, as either a Government-to-Government agreement or an AIIB credit, further to the one already agreed; the port of Piraeus in Greece, where China, through the State-owned China Ocean Shipping Company (COSCO), has acquired the licence for Pier II for the next 30 years, being a pillar for OBOR in the Mediterranean Sea; and the Djibouti naval base, China’s first permanent military base in the Indian Ocean.

In any case, the maritime projects are closely connected to the land projects. Land infrastructure is envisaged to complement the ports. The Trans Anatolian Project is one of the key elements in linking Asia and Europe. China’s Nomad Express, the trans-Caspian railway launched in August 2015, connected Kazakhstan and Azerbaijan. Further, transport corridors aim to connect Iran and Russia, and railway tracks for oil and gas are envisaged to connect Georgia and Europe. Also, the EU has initiated the Transport Corridor Europe-Caucasus-Asia, which complements China’s efforts. China has sought to develop Indonesia’s first high-speed railway, with a potential support from other ASEAN states. Further developments are noted in East Africa, where Kenya and Tanzania are competing for the largest port-railway in the area, and in the Suez Canal Economic Zone in Egypt, where the project plans to attract 150 businesses and USD 2 trillion in investment.

Through the OBOR Vision and Actions developed by the National Development and Reform Commission (NDRC), Ministry of Commerce (MOFCOM) and Ministry of Foreign Affairs (MOFA), China stressed the importance of orienting the development of the MSR towards the ASEAN States. Thus, China provided an acknowledgement of the need for diversity of civilisations and enhancing communication and cross-cultural exchanges as part of the Road strategy. Consequently, it is expected that the MSR will complement the land belt in developing business in the private and public sector. China’s welcoming efforts will benefit the interested parties.

[1] Donald Lewis and DianaMoise, BRI Roadmaps: The Legal and Policy Frameworks in Chaisse and Górski (eds.), The Belt and Road Initiative: Law, Economics and Politics (Brill 2018)