The Permanent Court of Arbitration (PCA) in The Hague on Tuesday ruled that China has no legal basis to claim “historic rights” to islands in the South China Sea and had violated the Philippines' sovereign rights. "The Tribunal concluded that there was no legal basis for China to claim historic rights within the sea areas falling within the 'nine-dash line'," the Hague-based Permanent Court of Arbitration said. The nine-dash refers to a demarcation line on a 1947 map of the sea, which is rich in energy, mineral and fishing resources.

The tribunal also found China had violated the Philippines’ sovereign rights. “Having found that certain areas are within the exclusive economic zone of the Philippines, the Tribunal found that China had violated the Philippines’ sovereign rights in its exclusive economic zone by (a) interfering with Philippine fishing and petroleum exploration, (b) constructing artificial islands and (c) failing to prevent Chinese fishermen from fishing in the zone.” In a unanimous, hard-hitting ruling, the Hague tribunal maintained that the disputed Spratly islands "cannot generate maritime zones collectively as unit" as claimed by China.
There are a few basic facts about China's claims in the South China Sea that are central to understanding the dispute. China has declared the South China Sea to be a "core interest" worth fighting for, along with Taiwan and Tibet, but it only discovered this fact in 2010.

There are three separate and distinct conflicts in the South China Sea, a fact that is normally confabulated in news coverage:

There are dozens and dozens of islands in the South China Sea, subject to conflicting claims by various countries [think of the scene in Braveheart "These Documents Were Lies When You Wrote Them!"]. The United States takes no position in such third party disputes.
China claims the entire South China Sea, via the infamous "Nine Dash Line" map. The United States says this claim is silly, since under international law maritime claims must be based on pieces of ground [coasts, rocks, etc], and cannot be based on simple lines on a map [actually, there are several such maps, and the lines do not line up]. The United States conducts Freedom of Navigation operations to assert US claims. China finds such operations annoying. China only discovered this ownership in 1949. China's claim to the entire South China Sea is unique in maritime law, and contravenes the fundamental principle of the Law of the Sea that requires maritime claims to be based on land features, not arbitrary lines on the water on a map. There is no basis for a "split the difference" compromise.
China has dredged coral and sand to form a handful of artificial islands which it is using as unsinkable aircraft carriers. Shina appears to assert that this artificial ojects have territorial waters. These claims violate a fundamental principle of maritime law that such artificial creations cannot acquire territorial waters. Arguing in the alternative, China might claim that since the entire South China Sea constitutes internal waters, the territorial water around the artificial islands is simply an extention of that claim.
The United States called in late 2015 for a halt to China's artificial island-building, and in recent weeks has tried to signal its determination to challenge Beijing over the disputed sea by sending military ships and planes near the islands.

The US said it has no intention of ending patrol missions across international waters and airspace, even as China rebuked it for sending a warship on 27 October 2015 near disputed South China Sea islets and reefs claimed by Beijing. "The United States is going to fly and sail anywhere where international law allows," the White House said in a statement. It added that "we would communicate in private to China what we would say in public. These operations are conducted in accordance with international law and applied evenhandedly around the globe.”

Beijing's foreign ministry said 28 October 2015 it summoned U.S. Ambassador Max Baucus to deliver a formal protest over the incident, which represents the U.S.'s boldest challenge yet to China's controversial territorial "This action by the United States threatens China's sovereignty and security interests and endangers the safety of personnel and facilities on the reef, which is a serious provocation" Vice Foreign Minister Zhang Yesui said.

By mid November 2015 Indonesia's security chief said the Southeast Asian country could become the second in the region to challenge China's claim to all of the South China Sea. That is, if Beijing and Jakarta cannot resolve their territorial dispute through dialogue. China’s nine-dash line claim includes Indonesia’s Natuna islands.

China sent a warning that appeared directed at the United States to not engage in what it has called “provocative behavior” in the South China Sea. The warning followed news reports 08 October 2015 that the US military was planning to sail warships close to artificial islands Beijing has been aggressively building in hopes of bolstering its claims in the disputed waters. According to the reports, US officials have said they are considering sailing warships inside the 12-nautical-mile zones of the artificial islands that Beijing claims are a legitimate extension of its territory within the next two weeks [ie, before the end of October].

"The Chinese navy has closely monitored the provocative actions of the United States and issued several warnings, while exercising enormous restraint in the interests of safeguarding the overall situation in bilateral relations," said Wu Shengli, commander of the People's Liberation Army Navy, according to a report on the defense ministry's website late on 19 NOvembe 2015. "If the United States carries out repeated provocations despite China's opposition, we have the ability to defend our national sovereignty and security."

Despite many Chinese diplomatic assurances to the contrary, Chinese assertiveness in the South China Sea is an attempt to re-establish traditional Chinese hegemony in the region. China's strategy is taking concrete actions to solidify its claims in the South China Sea, and Chinese officials have underscored such perception.

China has asserted its claims for the South China Sea's rich mineral, oil and fishing grounds by increasing patrols and escorts for its fishing fleets. The ships’ excursions regularly raise regional tensions. ASEAN foreign ministers meeting in Brunei in April 2013 agreed to pursue dialogue with China on a Code of Conduct in the South China Sea. ASEAN wants a legally binding agreement to discourage such aggressive moves. It would replace a ten-year pledge by the claimants not to cause conflict, known as the Declaration of Conduct.

China is forging ahead with reclamation projects on at least seven tiny but hotly contested features in the South China Sea, posing a major challenge in the Philippines' international arbitration case against China. Since the beginning of 2015, satellite images of Chinese reclamation work in the Spratly Islands have shown shoals and reefs turning into artificial islands. By April 2015 major harbors that can dock military ships were nearly completed. So were several airstrips and at least three multistory buildings where bare outposts once stood.

China’s Foreign Ministry expressed serious concern on 27 March 2015 after the Philippines said it would resume repair and reconstruction works on disputed islands in the South China Sea. The ministry accused Manila of infringing on Chinese sovereignty. The Philippines had halted activities in 2014 over concerns about the effect on an international arbitration complaint filed against China.

In September 2015 an agreement was struck between Presidents Barack Obama and Xi Jinping on rules for military air-to-air encounters. The deal, which followed an earlier agreement on encounters between naval ships, was aimed at preventing encounters from escalating or causing crashes. Citing successful implementation of the Code of Unplanned Encounters on the Sea, signed by the two sides in April 2014, Assistant Secretary of Defense David Shear told Congress that he hoped for more positive results from further engagement with China. In February 2014 the United States for the first time explicitly rejected the U-shaped, nine-dash line that China uses to assert sovereignty over nearly the whole South China Sea, experts say, strengthening the position of rival claimants and setting the stage for what could be an international legal showdown with Beijing. Washington had always said that it takes no position on competing territorial claims in the South China Sea among China, the Philippines, Vietnam, Malaysia, Taiwan, and Brunei and opposes any use of force to resolve such issues.

The international community, he said, would welcome China to clarify or adjust its nine-dash line claim to bring it in accordance with the international law of the sea. "I think it is imperative that we be clear about what we mean when the United States says that we take no position on competing claims to sovereignty over disputed land features" in the region, Russel said.

Unlike other countries, Beijing's claim to up to about 90 percent of the South China Sea is not based on claims to particular islands or other features but on a historical map China officially submitted to the United Nations in 2009. The map contains a nine-dash line forming a U-shape down the east coast of Vietnam to just north of Indonesia and then continuing northwards up the west coast of the Philippines. The nine-dash line has been considered by many experts as incompatible with the 1982 United Nations Convention on the Law of the Sea (UNCLOS), which rejects historically based claims.

Deng Xiaoping said "since we can't solve the South China Sea issue, we can leave it to the next generation which will be smarter." It is impossible to resolve the disputes over the South China Sea to the mutual benefit of all. Hypothetically, the claims of other littoral states could be reconciled by sectoral extensions of the Exclusive Economic Zones [as was done in the Gulf of Guinea]. China's claims cannot be so reconciled, since China claims vritually the entire South China Sea, which it views as internal waters.

China claims most of the South China Sea as either territorial water or Exclusive Economic Zone. China's claims cannot be reconciled with the claims of other states in the South China Sea area. The other states have conflicting claims that can be harmonized, the way there were compromises among the conflicting claims for the Gulf of Guinea in Africa. In the South China Sea, each of the littoral states claims areas that are immediately contiguous to their territorial seas, and it would be possible to "split the difference" on competing claims. But China claims the entirety of the South China Sea, so there is no possibility of compromise with China's position, since it is all or nothing.

In July 1977, when Deng Xiaoping emerged as China's leader following the death of Mao Tse-tung, the Chinese foreign minister, Huang Hua, confirmed that China's claim to the South China Sea was "non-negotiable" in the strongest terms. At the same time he commented: "The territory of China reaches as far south as the James Shoals, near Malaysia's Borneo territory... I remember that while I was still a schoolboy, I read about those islands in the geography books. At that time, I never heard anyone say those islands were not China's... The Vietnamese claim that the islands belong to them. Let them talk that way. They have repeatedly asked us to negotiate with them on the issue; we have always declined to do so... As to the ownership of the islands, there are historical documents that can be verified. There is no need for negotiations since they originally belonged to China.... In this respect Taiwan's attitude is all right. At least they have some patriotism and would not sell out the islands..."

Under the United Nations Convention on the Law of the Sea (UNCLOS) coastal states have the right to establish sovereignty over adjacent waters out to a maximum of 12 nautical miles from the nation's coastline, including the coastline of offshore islands. These enclosed waters are known as the coastal state's territorial sea.

During the negotiations of the text of the 1982 UNCLOS military activities in the EEZ were a controversial issue. Some coastal States such as Bangladesh, Brazil, Cape Verde, Malaysia, Pakistan and Uruguay contended that other States cannot carry out military exercises or maneuvers in or over their EEZ without their consent. In June 1998, the PRC passed the "Exclusive Economic Zone and Continental Shelf Act." This Act created an exclusive economic zone (EEZ) with 200 nautical mile limits from its coastal baseline, and claimed the right, inter alia, to broadly undefined powers to enforce laws in the EEZ, "including security laws and regulations." Based on the Act, the PRC does not recognize the airspace above its EEZ as "international airspace" and has interfered with and protested US reconnaissance flights over its EEZ. China takes the position that all maritime data collection activities, including military intelligence and hydrographic collection activities, fall within the United Nations Convention on the Law of the Sea [UNCLOS] provisions for marine scientific research and therefore require coastal-state consent before they could be carried out in the two-hundred-nautical-mile EEZ.

The US has protested this sovereignty claim as a violation of international law numerous times since this law was passed. The US Government has long conducted a vigorous freedom of navigation program through which it has asserted its navigational rights in the face of what it has regarded as excessive claims by coastal states of jurisdiction over ocean space or international passages. When remonstrations and protestations are unavailing, elements of US military forces may sail into or fly over disputed regions for the purpose of demonstrating their right and determination to continue to do so.

ASEAN countries are outward-looking, especially in term of protecting their Exclusive Economic Zones (EEZ). The convergence of interests in conflict areas such as the Spratly Islands affects the relationship among Malaysia, Philippines and Brunei with each claiming parts of the Spratlys. While armed conflicts among the countries of ASEAN overthe Spratly issue may be a remote possibility, it hascompounded historic frictions over unresolved territorial conflicts.

This will continue to be one of the driving force behind arms acquisition which is clearly demonstrated by the expansion of the naval and air forces of Malaysia. All the other ASEAN countries - except for Brunei - have expanded their naval and air arms to safeguard their maritime interests.

Most of the marine traffic in the South China Sea goes to the People's Republic of China and Hong Kong. Vietnam, Indonesia, Taiwan, and the Philippines are largely served by coast-hugging routes outside the PRC’s dreaded Nine-Dash-Line.