Singapore (Platts)--23Jan2013/435 am EST/935 GMT

The Philippines has taken China to a United Nations arbitration tribunal to settle their territorial dispute over the South China Sea, referred to as the West Philippine Sea by Manila, in a move which one analyst likened to "the Philippines calling China's bluff."

"China has repeatedly said it wants to resolve territorial disputes bilaterally, yet it has 'indisputable sovereignty' over the South China Sea," Carl Thayer, an analyst on issues involving the South China Sea at the Australian Defence Force Academy, said Wednesday.

The Philippines Notification and Statement of Claim lodged with the UN challenges China on both accounts, Thayer said.

"If the arbitration tribunal does go ahead and hear the case, it could well undermine China's claim to 'indisputable sovereignty' to the South China Sea," he added.

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Philippine Secretary of Foreign Affairs Albert del Rosario said Tuesday that his country has exhausted almost all political and diplomatic avenues for a peaceful negotiated settlement of its maritime dispute with China.

"On numerous occasions, dating back to 1995, the Philippines has been exchanging views with China to peacefully settle these disputes. To this day, a solution is still elusive. We hope that the arbitral proceedings shall bring this dispute to a durable solution," he said in a statement posted on the Department of Foreign Affairs website Wednesday.

China claims sovereignty over as much as 80% of the South China Sea as outlined by its so-called nine-dashed line, which ropes in the Paracel and Spratly islands as well as island atolls closer to the Philippines.

Disputes over the region arise mostly because of its suspected vast oil and gas reserves. The sea is also home to vast fishing grounds and hosts shipping lanes that are vital for global trade.

Estimates for the potential hydrocarbon resources in the South China Sea run as high as 200 billion barrels of oil equivalent -- with some Chinese estimates putting them much higher -- although due to a lack of exploratory drilling there are no proven oil or gas reserve estimates.

CHINA'S NINE-DASH LINE

In its Notification and Statement of Claim submitted to the UN, Manila has challenged China's nine-dash line claim and has asked the tribunal to compel China to desist from unlawful activities that violate the sovereign rights and jurisdiction of the Philippines under the 1982 United Nations Convention on the Law of the Sea, the DFA said.

The Philippines ratified the convention in 1984 and China in 1996.

The DFA added that the move was taken by Manila alone, and had nothing to do with its allies Japan or the US.

China's ambassador to the Philippines, Ma Keqing, was summoned to the DFA on Tuesday and notified of the Philippines' claim before the UN.

China is likely to react negatively to the Philippines initiative because it has legal implications for the other claimants to the South China Sea, according to Thayer.

"China faces a dilemma on how to respond, should it engage legally and pursue a peaceful resolution of this dispute, or should China brazen it out and resort to intimidation," he said.

"The Chinese side strongly holds that the disputes on South China Sea should be settled by the parties concerned through negotiations," Xinhua news agency quoted Ma as saying during his meeting Tuesday with Assistant Secretary of the Philippine DFA Theresa Lasaro.

Ma reiterated China's principled position that it has indisputable sovereignty over the islands in the South China Sea and its adjacent waters at the meeting.

"This is also the consensus reached by parties concerned in the Declaration on the Conduct of Parties in the South China Sea, " she added.

Beijing has always stood for a negotiated settlement of international disputes through peaceful means, Ma said, adding that China has solved questions regarding territory and border with some neighboring countries through bilateral consultations and negotiations in an equitable, reasonable and amicable manner.

CLASHES

China and the Philippines have repeatedly clashed in recent years over the islands, the most recent being a standoff between Philippine naval ships and Chinese fishing boats at the Scarborough Shoal outcrop in June last year.

China's claim to the South China Sea has been most resolutely contested by Vietnam and the Philippines, although Brunei, Malaysia and Taiwan also stake claims to some island territories in the region.

The Philippines is also an active claimant in terms of oil and gas exploration rights and has been in dispute with China over its own latest exploration round, which takes in two areas that China says fall within its waters.

The two areas claimed by China -- Areas 3 and 4, out of 15 blocks on offer by the Philippines -- are located offshore northwest Palawan Island, lying within about 80 km (49 miles) off the Philippine coast at their closest point.

Apart from Areas 3 and 4, China also claims sovereignty over exploration area Service Contract 72, just to the southwest of the two blocks.

DISPUTE WITH VIETNAM

Vietnam and China have competing claims to the Paracel and Spratly Islands in the South China Sea, and regularly trade diplomatic barbs over sovereignty and fishing rights in the contested waters.

The dispute stepped up in intensity in June 2012 when Vietnam's National Assembly approved a maritime law claiming sovereignty and jurisdiction over the Paracel and Spratly islands, a move viewed by China as a violation of its sovereignty.

This was followed two days later by Chinese state-owned oil company CNOOC offering nine offshore blocks, located in what Vietnam says is its exclusive economic zone, to international oil and gas companies for bidding.

PetroVietnam has urged foreign companies not to compete for the acreage, and said the blocks offered by CNOOC overlapped with tracts already being explored by Vietnam, in partnership with foreign companies including India's ONGC, Russia's Gazprom and ExxonMobil.

Vietnam's Ministry of Foreign Affairs is expected to give its formal response to the Philippine-China issue in its regular press conference on Thursday, sources with knowledge of the matter said Tuesday.

Vietnam and China signed an agreement on basic principles guiding the settlement of sea-related issues in Beijing in October 2011. Under the agreement, the two countries agreed to settle the South China Sea dispute through peaceful negotiations.

--Mriganka Jaipuriyar, mriganka@platts.com
--Song Yen Ling, yen_ling_song@platts.com
--Dao Dang Toan, newsdesk@platts.com
--Edited by James Leech, james_leech@platts.com

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