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Joint Development in the South China Sea: A New

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ESTU 21,1_83-109II 3/31/06 9:13 PM Page 83

Joint Development in the South China Sea:

A New Approach

Zou Keyuan*
East Asian Institute, National University of Singapore, Singapore

ABSTRACT

The political situation in the South China Sea is complicated, as it contains potential for conflict with
different national interests, in particular around the Spratly Islands which are currently under multiple
territorial and maritime claims. This article argues for a new proposal of joint development, at least as
a provisional means, pending the settlement of the territorial and maritime disputes, involving all the
parties concerned, based on the 1982 United Nations Convention on the Law of the Sea and the 2002
Declaration on the Conduct of the Parties in the South China Sea Between the Association of Southeast
Asian Nations (ASEAN) and China, so as to pave the way for the sharing of resources between ASEAN
members and China on the one hand and to maintain regional peace and security in East Asia on the
other.

Introduction
The South China Sea is categorised as a semi-enclosed sea in East Asia under
the general definition set forth in the United Nations Convention on the Law
of the Sea (hereinafter referred to as the LOS Convention).1 Accordingly, an
“enclosed or semi-enclosed sea” is defined as a “gulf, basin, or sea surrounded
by two or more States and connected to another sea or the ocean by a narrow
outlet or consisting entirely or primarily of the territorial seas and exclusive
economic zones of two or more coastal States”.2 The South China Sea suits
this definition geographically because it is surrounded by six states—China
(including the People’s Republic of China and Taiwan), Vietnam, Philippines,

* The author is grateful to the anonymous reviewers for their helpful comments on an earlier
version of this article but assumes responsibility for any error or omission.
1 The LOS Convention was adopted in the Third United Nations Conference on the Law of
the Sea on 10 December 1982 and entered into force on 16 November 1994. Text is printed
in The Law of the Sea: Official Text of the United Nations Convention on the Law of the
Sea with Annexes and Index (New York, United Nations, 1983).
2 Art. 122 of the LOS Convention.

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© Koninklijke Brill NV, 2006

83
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84 THE INTERNATIONAL JOURNAL OF MARINE AND COASTAL LAW

Brunei, Malaysia and Indonesia.3 It has an area of 648,000 square nautical

miles, twice the size of the Sea of Japan.4 There are hundreds of small islands
in the South China Sea, namely uninhabited islets, shoals, reefs, banks, sands,
cays and rocks.5 They are distributed widely in the South China Sea, mostly
in the form of four groups of islands and underwater features, which are the
Pratas Islands, the Paracel Islands, the Macclesfield Bank (Zhongsha Qundao)
and the Spratly Islands (see Figure 1).
Natural resources in the South China Sea are abundant. In addition to
marine living resources, mineral reserves, including oil and gas, have a huge
potential. As estimated by scientists, there are five sedimentary basins in the
northern part of the South China Sea with an area of 420,000 square kilome-
tres. As of 1997, 56 oilfields or structures had been discovered, containing 700
million tons of oil and 310 billion cubic metres of gas.6 In the Spratly area
there are eight sedimentary basins with an area of 410,000 square kilometres
and 260,000 square kilometres are within China’s unilaterally claimed U-
shaped line.7 An incomplete figure from China shows that these eight sedi-
mentary basins contain 34.97 billion tons of petroleum reserves, including the
discovered 1.182 billion tons of oil and 8,000 billion cubic metres of gas.8
There are also oily sedimentary basins existing around the Paracel Islands,
though no proven hydrocarbon resources have been discovered. Thus the
South China Sea is sometimes called a second “Persian Gulf ”. Unlike the
Chinese estimation, the general view outside China is less optimistic. A
1993–94 figure provided by the US Geological Survey estimated the sum total
of discovered oil reserves and undiscovered resources in the offshore basins of
the South China Sea at 28 billion barrels.9 However, if this figure is added
with the reserves of natural gas which, according to the US Geological Survey,
accounts for 60–70 per cent of the total potential hydrocarbon resources in this
region,10 the overall picture of petroleum exploration and development, though

3 In a broad sense, the Gulf of Thailand is part of the whole South China Sea. However, it
is not included here due to its irrelevance to the subject matter of the present study.
4 J.R.V. Prescott, The Maritime Political Boundaries of the World (London, Methuen, 1985),
p. 209.
5 According to Hungdah Chiu, there are 127 islands in the South China Sea based upon a sur-
vey conducted during 1946–1947 sponsored by the then Chinese Ministry of Internal Affairs:
Hungdah Chiu, “South China Sea Islands: Implications for Delimiting the Seabed and Future
Shipping Routes”, (1977) China Quarterly 72, 756.
6 See Zhao Huanting et al., Geomorphology and Environment of the South China Coast and
the South China Sea Islands (Beijing, Science Press, 1999) (in Chinese), p. 484.
7 For details of this line and its legal implications, see Zou Keyuan, “The Chinese Traditional
Maritime Boundary Line in the South China Sea and Its Legal Consequences for the
Resolution of the Dispute over the Spratly Islands”, (1999) 14 International Journal of
Marine and Coastal Law 1, 27–55.
8 Zhao et al., note 6 above, p. 484.
9 See “South China Sea Region”, Country Analysis Briefs, September 2003, at http://www.
eia.doe.gov/emeu/cabs/schina.html (accessed 4 October 2004).
10 Ibid.
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JOINT DEVELOPMENT IN THE SOUTH CHINA SEA 85

Oil and Gas Resources

Active gas/oil field Competing Claims in the South China Sea
New field discovery All of the Spratly Islands are claimed by China, Taiwan, 0 100 200 Kilometers
Concession block and Vietnam, part of them are claimed by Malaysia and
the Philippines. Brunei has a maritime claim in the area. 0 100 200 Nautical Miles
The United States does not recognize these claims and
South China Sea Maritime Claims considers the sovereignity of the islands to be in dispute.
Taiwan
Line segment shown on Chinese maps
Malaysian claim
Philippine (Kalayaan) claim
Indonesian claim
C h i n a Hong Kong
Vietnamese claim Macau
Bruneian claim Pratas
Islands
108˚ 03˚ 18- E

Other South China Sea Claims

Hypothetical exclusive economic zone limit
Hainan
Hypothetical territorial sea limit (12 nm) Hypothetical EEZ limit
Dao
Indonesian-Malaysian negotiated from coastal states
maritime boundary
Malaysian-Vietnamese joint development 200
Malaysian-Thai joint development coa nm f
Paracel stal rom
Islands stat
es

Thailand Laos
MANILA
Vietnam South Scarborough
China Reef

Sea
Cambodia
PHNOM PENH

Alcom study
(Philippines)
Bach HP oilfield
Pong oilfield (White Tiger)
(Dragon) (Vietnam) Philippines
(Vietnam) Crestone
exploration Spratly Islands
Dai Hung oilfield
(Big Bear) (China)
(Vietnam)
Thanh Long
(Blue Dragon)
(Vietnam)

BANDAR SERI
BEGAWAN
Exxon
(Indonesia)
Natuna Besar
Brunei
Malaysia Indonesia
Malaysia
Indonesia

Source: CIA Maps and Publications for the Public, at http://www.eia.doe.gov/emeu/cabs/

schinatab.html (accessed 4 October 2004).

Figure 1. Competing Claims in the South China Sea

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86 THE INTERNATIONAL JOURNAL OF MARINE AND COASTAL LAW

within the conservative calculation, is still very encouraging. Someone even

used the Natuna gas field as an indicator to presume that the potentials in the
South China Sea could be very significant.11
The political situation in the South China Sea is complicated, as it contains
potential for conflict with different national interests. In terms of the island groups,
because of their geographical differences, their political situations are accord-
ingly different from each other. The Pratas Islands are under the firm control
of the Taiwan Chinese. No competing claims exist there under the “one-
China” conception. For the Macclesfield Bank, the only claimant is China
(including Taiwan).12 Nevertheless, if the Scarborough Reef is considered part
of the Macclesfield (Zhongsha Qundao), then recent developments indicate
that the Philippines has also lodged its territorial claim over the Reef, and
indeed over the Macclesfield (Zhongsha Qundao), if the former would be regarded
as its part. The Paracel Islands are under the control of China, though con-
tested by the Vietnamese. Because of the firm control by the Chinese, the
political situation around the Paracels is relatively calm and stable in compar-
ison with that around the Spratly Islands. The dispute over the Spratly Islands
is most complicated since it has been lingering on for a long time and
involves as many as five states (China (including Taiwan), Malaysia, Vietnam,
the Philippines and Brunei). It is not usual in the history of international rela-
tions that so many countries make claims over such small islets, for instance
either the whole or part of the Spratly Islands and their surrounding waters
and sea-bed. As many predict, if the issue of the Spratly Islands cannot be
well handled, it could produce danger or threat to peace and security in the
East Asian region and in the world in general. In China’s view, the issue of
disputes over boundaries and sovereignty over areas of the South China Sea
is one of the three main factors that might trigger military conflicts in the
Asia-Pacific region.13
The complicated political and legal situation in the South China Sea does
not stop adjacent countries concerned from unilaterally exploring and exploit-
ing oil and gas in undisputed or disputed offshore areas.
Indonesia is the only OPEC member in East Asia and is important to the
world energy market. The Natuna Islands in the South China Sea and sur-
rounding seas are a major petroleum producing site. The 400-mile Natuna pipeline

11 Wilarso, “The Future of Oceanic Oil and Gas: The Case of Indonesia” in Seoung-Yong
Hong, Edward L. Miles and Choon-ho Park (eds.), The Role of the Oceans in the 21st
Century (University of Hawaii, Law of the Sea Institute, 1995), p. 455.
12 A main reason that there is no other claimant for the Macclesfield Bank is that this Bank
is permanently submerged. Otherwise, Vietnam or the Philippines might have claimed it as
well.
13 The other two factors are: military confrontation in the Korean Peninsular, and the contro-
versial US-Japan military alliance with Taiwan’s separatist activities. See Yan Xuetong, “Co-
Operation Key to Regional Peace”, China Daily, 27 March 1998, p. 4.
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JOINT DEVELOPMENT IN THE SOUTH CHINA SEA 87

is one of the longest undersea gas pipelines in the world, transporting gas to
Singapore; new pipeline proposals from East Natuna to the Philippines are
under consideration.14 Though there is no territorial dispute with other South
China Sea claimants, China considers that Indonesia has invaded its claimed
sea areas by extracting oil and gas within the Chinese-claimed U-shaped line.15
The Philippines reached a crude oil production averaging 23,512 barrels per
day (bbl/d) in 2002 from the 2001 figure of only 1,000 bbl/d. This dramatic
increase was primarily due to the development of deep-sea oil deposits in the
Malampaya field.16 In February 2004, the Philippines unilaterally announced
an international bidding for its oil development in the South China Sea near
its offshore Malampaya gas field close to the southern island of Palawan. It is
reported that 16 foreign firms had submitted bids.17 China expressed its con-
cern about this unilateral move.
Malaysia produced monthly crude oil between 650,000 bbl/d and 730,000
bbl/d between 1996 and mid-2003 and its domestic production is primarily
from offshore oilfields near peninsular Malaysia.18 In June 2003 Petronas con-
cluded an agreement with Petrovietnam and Pertamina of Indonesia for joint
exploration of Block SK 305 offshore from Sarawak. Commercial production
of natural gas at Bintang in the South China Sea began in 2003.19 Since April
2003 Malaysia has sent four cruises with 11 survey vessels to Nantong Jiao
(Louisa Reef ) in the Spratly area for petroleum prospecting activities.20
Brunei is a small but wealthy country in East Asia thanks to profits gener-
ated from crude oil and natural gas. It produced 196,000 bbl/d in 2003.21 Since
Brunei is adjacent to the South China Sea, the majority of its oilfields are
located offshore.
Vietnam has a very long coastline and offshore oil reserves are very prom-
ising. As recorded, its crude oil production in 2003 was 352,507 bbl/d on
average. In January 2003, the Petrovietnam and Petronas Carigali Overseas

14 “Indonesia”, Country Analysis Briefs, July 2004, at http://www.eia.doe.gov/emeu/cabs/indonesa.

html (accessed 4 October 2004).
15 For details, see Zou Keyuan, “The Chinese Traditional Maritime Boundary Line in the South
China Sea and Its Legal Consequences for the Resolution of the Dispute Over the Spratly
Islands”, (1999) 14 IJCML 1, 27–55.
16 “Philippines”, Country Analysis Briefs, July 2004, at http://www.eia.doe.gov/emeu/cabs/
philippi.html (accessed 4 October 2004).
17 See “Sixteen Firms Want to Hunt For Oil in Philippines”, Reuters, 3 March 2004, at
http://www.forbes.com/business/newswire/2004/03/03/rtr1284135.html (accessed 26 March
2004).
18 “Malaysia”, Country Analysis Briefs, July 2004, at http://www.eia.doe.gov/emeu/cabs/
malaysia.html (accessed 4 October 2004).
19 Ibid.
20 “More Than 10 Countries Carve Up South China Sea Resources and the Chinese Govern-
ment Can Do Nothing”, Liaowan Dongfang, 15 January 2004, at http://peacehall.com
(accessed 16 January 2004).
21 “Brunei”, Country Analysis Briefs, August 2004, at http://www.eia.doe.gov/emeu/cabs/
brunei.html (accessed 4 October 2004).
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88 THE INTERNATIONAL JOURNAL OF MARINE AND COASTAL LAW

Company of Malaysia signed a contract to explore and exploit oil and gas in
lot 01–02–97, located on Vietnam’s continental shelf.22
China (PRC) is thirsty for oil and gas with the increase of its economic
growth. It was the second largest consumer of petroleum products in 2003,
surpassing Japan for the first time, with a total demand of 5.56 million bbl/d.23
The China National Offshore Oil Corporation (CNOOC)—the third largest
state-owned oil company in China—is responsible for offshore oil and gas
exploration and production. It has been operating petroleum activities in the
South China Sea, mainly adjacent to Hainan Island and Hong Kong, such as the
Weizhou, Huizhou, Lufeng, Dongfang oil/gas fields. CNOOC has attempted
to increase its production to 20 per cent of China’s total petroleum production
by 2010.24 It is to be noted that, except for the frustrating Crestone deal, China
has not undertaken any actual oil and gas exploration and exploitation around
the Spratly Islands.
However, unilateral exploration activities often cause conflicts with inter-
ested countries. Taking the Crestone concession case as an example, we can
see how seriously a unilateral act affected normal relations between the two
countries concerned. In May 1992, China signed a contract with the US com-
pany Crestone to explore for oil near the Spratly Islands in an area that
Vietnam claimed as its continental shelf. In December 1993 Vietnam de-
manded that Crestone cancel this offshore oil development. In 1994, Crestone
joined with a Chinese partner to explore China’s Wan’ Bei-21 (WAB-21
block). When Vietnam protested that the exploration was in Vietnamese waters
in their blocks 133, 134 and 135, China offered to split Wan’ Bei production
with Vietnam. In August 1994, Vietnamese gunboats forced a Chinese explo-
ration ship to leave an oilfield in a region claimed by the Vietnamese. In April
1996, Vietnam leased exploration blocks to the US company Conoco, and
ruled out co-operation with US oil companies that signed Chinese explora-
tion contracts in disputed waters. Vietnamese blocks 133 and 134 cover half
the zone leased to Crestone by China. China protested. In March 1997, Vietna-
mese issued a protest after the Chinese Kantan-3 oil-rig drills near the
Vietnamese continental shelf. The drilling was conducted offshore Da Nang,
in an area Vietnam calls Block 113. The block is located 64 nautical miles off
Chan May cape in Vietnam, and 71 nautical miles off China’s Hainan Island.
The diplomatic protests were followed by the departure of the Chinese rig. In
December 1997, Vietnamese protested after the Exploration Ship No. 8 and
two supply ships entered the Wan’ Bei exploration block. All three vessels
were escorted away by the Vietnamese navy. In September 1998, Vietnam protested

22 “Vietnam”, Country Analysis Briefs, June 2004, at http://www.eia.doe.gov/emeu/cabs/viet-

nam.html (accessed 4 October 2004).
23 “China”, Country Analysis Briefs, July 2004, at http://www.eia.doe.gov/emeu/cabs/china.html
(accessed 4 October 2004).
24 For details, see Zou Keyuan, “China’s Governance Over Offshore Oil and Gas Development
and Management”, (2004) 35 Ocean Development and International Law 4, 339–364.
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JOINT DEVELOPMENT IN THE SOUTH CHINA SEA 89

after a Chinese report stating that Crestone and China were continuing their
survey of the Spratly Islands and the Tu Chinh region (“Wan’an Bei” in
Chinese). This case illustrates the difficulties that unilateral petroleum activi-
ties can give rise to in practice. In addition, conflicts over resources in the
South China Sea have also occurred between other claimants, such as Brunei
and Malaysia over their conflicting EEZ claims. The reason behind these dis-
putes is simple: extraction by a single state can deplete the fluid deposit in
which other adjacent states are entitled to share.25 Sometimes even unilateral
extraction fully within the area of a state may cause international conflict. The
Chunxiao Gas Field Incident illustrates this well. China has conducted gas-
extraction activities in the Chunxiao Gas Field in the East China Sea, but these
activities have invited protests from Japan because the gas field is located only
five kilometres from the boundary line claimed by Japan. Though the two
sides held talks,26 the issue remains unresolved at the time of writing. For this
reason, joint development seems to be the only feasible option for the extrac-
tion of petroleum resources in the disputed areas.

Joint Development in International Law and State Practice

The concept of joint development first appeared in international law in the
1970s. There are various definitions of joint development in relevant legal literature.
An earlier definition was offered by Rainer Lagoni, a German scholar who
defined joint development as “co-operation between States with regard to the
exploration for and exploitation of certain deposits, fields, or accumulations of
non-living resources which either extend across a boundary or lie in an area
of overlapping claims”.27 Gault defines joint development as “a decision by one
or more countries to pool any rights they may have over a given area and, to
a greater or lesser degree, undertake some form of joint management for the
purpose of exploring and exploiting offshore minerals”.28 Another pioneering
scholar in the field of joint development studies is William T. Onorato, who
published an article in 1968 discussing the idea of joint development.29 A fur-
ther article of the same title was published again in the same journal in 1977.30
25 Masahiro Miyoshi, “The Joint Development of Offshore Oil and Gas in Relation to Maritime
Boundary Delimitation”, (1999) 2 Maritime Briefing 5, 5.
26 The talk was held on 25 October 2004 without result. See “FM: Talks With Japan on Sea
Border Advance”, China Daily, 26 October 2004.
27 See International Law Association, (1988) Report on Joint Development of Non-Living Resources
in the Exclusive Economic Zone, p. 2.
28 I.T. Gault, “Joint Development of Offshore Mineral Resources—Progress and Prospects for
the Future”, (1988) 12 Mineral Resources Forum 3, 275; cited in British Institute of
International and Comparative Law, Joint Development of Offshore Oil and Gas: A Model
Agreement for States for Joint Development with Explanatory Commentary (London, British
Institute of International and Comparative Law, 1989), p. 43.
29 See William T. Onorato, “Apportionment of an International Common Petroleum Deposit”,
(1968) 17 International and Comparative Law Quarterly 85–101.
30 See William T. Onorato, “Apportionment of an International Common Petroleum Deposit”,
(1977) 26 International and Comparative Law Quarterly 324–337.
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90 THE INTERNATIONAL JOURNAL OF MARINE AND COASTAL LAW

His most important point is that the old doctrine that a potential common
petroleum deposit should be directed to the preservation of the “unity of the
deposit . . . or, more exactly, to unity of national ownership and exploitation
authority over it” was out of date and such deposit can be accepted as joint
property of several states under which it might lie.31 Though no definition on
joint development is contained in these articles, the notion of shared property,
in particular concerning its apportionment, indicates the possibility of joint
development between states concerned. Miyoshi even observed that the origi-
nal idea of joint development can be traced back to as early as the “1930s
when studies and judicial cases on joint petroleum development can be found
in the United States”.32 However, being a modern concept in international law,
joint development is relatively new. Furthermore, the definitions provided
above have some limitations, with emphasis either on overlapping claims or
on general co-operation without specifics.
Because of these, the British Institute of International and Comparative Law,
having compared different definitions, defines joint development as “an agree-
ment between two States to develop so as to share jointly in agreed propor-
tions by inter-State co-operation and national measures the offshore oil and
gas in a designated zone of the sea-bed and subsoil of the continental shelf to
which both or either of the participating States are entitled in international
law”.33 This definition is broad enough to cover all relevant situations which
joint development is needed and/or required. Generally speaking, the concept
of joint development contains several characteristics:
(a) it is an arrangement between two countries;
(b) it is usually concerned with an overlapping maritime area;
(c) it can be used as a provisional arrangement pending the settlement of the
boundary delimitation disputes between the countries concerned;
(d) it is designed to jointly develop the mineral resources in the disputed area
or a defined area shared by two countries.
In this sense, joint development is a most feasible mechanism by which to
shelve the dispute so as to pave the way for co-operation pending the settle-
ment of the territorial and/or maritime disputes over a certain sea area due to
the overlapping claims.
It is necessary to differentiate the concept of joint development from simi-
lar concepts such as that of unitisation, which straddles the same structure licensed
to two oil companies, or of joint venture which is established between, say, a

31 See Onorato, ibid., p. 325.

32 Miyoshi (1999), note 25 above, p. 1. According to Miyoshi, joint development is defined as
“an inter-governmental arrangement of a provisional nature, designed for functional purpose
of joint exploration for and/or exploitation of hydrocarbon resources of the seabed beyond
the territorial sea”, ibid., p. 3.
33 British Institute of International and Comparative Law, note 28 above, p. 45.
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JOINT DEVELOPMENT IN THE SOUTH CHINA SEA 91

Chinese enterprise and a foreign investor, though the detailed implementation

of joint development will incorporate features of unitisation and/or joint ven-
ture agreements. Furthermore, joint development carries special meaning and
should not be misunderstood simply as something equivalent to joint co-operation.
Finally, while joint development is mainly applicable to the use of mineral
resources, it is not excluded in the area of marine-living resources manage-
ment as manifested in some existing cases, such as the Colombia-Jamaica
Treaty of 12 November 1993 which set up a “Joint Regime Area” for joint
management, control, exploration and exploitation of living and non-living
resources,34 and the Guinea-Bissau-Senegal Agreement of 14 October 1993
which covers not only oil and gas but also living-marine resources.35
The LOS Convention provides a legal basis for joint development in dis-
puted maritime areas pending the settlement of the maritime boundary delim-
itation. Articles 74(3) and 83(3) provide that, pending agreement reached
between them on the delimitation of the EEZ and continental shelf, the states
concerned, in a spirit of understanding and co-operation, are required to “make
every effort to enter into provisional arrangements of a practical nature and,
during this transitional period, not to jeopardize or hamper the reaching of the
final agreement”. This legal norm has been reflected in many existing cases
and can apply to the South China Sea. However, the LOS Convention leaves
other options open to the states concerned about whether they can enter into
joint development agreements after the definite maritime boundary delimita-
tion. It may be recalled that as early as 1969 the International Court of Justice
(ICJ) touched on this issue in the North Sea Continental Shelf cases by stat-
ing that:
if . . . the delimitation leaves to the Parties areas that overlap, there are to be
divided between them in agreed proportions or failing agreement, equally, unless
they decide on a regime of joint jurisdiction, use or exploitation for the zones of
overlap or any part of them.36
Finally, it should be noted that peaceful resolution of international disputes is
one of the fundamental principles of international law, as stipulated both in the
Charter of the United Nations and the LOS Convention. Joint development is
one of the options for states to reach a peaceful resolution in the maritime
domain.
In state practice, there are many precedents setting forth joint development
arrangements. The first of this kind was made between Kuwait and Saudi
Arabia in 1922, the earliest example of a joint development regime. Based on
the 1922 Aqeer Agreement, the two countries were co-tenants in the neutral

34 See Miyoshi, note 25 above, p. 23.

35 See Miyoshi, note 25 above, p. 37.
36 North Sea Continental Shelf Cases, Judgment of 20 February 1969, [1969] ICJ Rep 53.
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92 THE INTERNATIONAL JOURNAL OF MARINE AND COASTAL LAW

zone, holding shares equally and jointly in condominium and later they con-
sented to joint development by their concessionaires.37
In summary, there are generally three types of joint development schemes:
(1) To be devised with the maritime boundary delimited, such as the Bahrain-
Saudi Arabia Agreement Concerning the Delimitation of the Continental
Shelf of 22 February 1958, the France-Spain Convention on the
Delimitation of the Continental Shelves of the Two States in the Bay of
Biscay of 29 January 1974, the Sudan-Saudi Arabia Agreement Relating
to the Joint Exploration and Exploitation of the Natural Resources of the
Seabed and Subsoil of the Red Sea in a Defined Area of the Two Coun-
tries in the Red Sea of 16 May 1974, and the Iceland-Norway Agreement
on the Continental Shelf Between Iceland and Jan Mayen of 22 October 1981.
(2) For the purpose of unitising hydrocarbon deposits which straddle the
boundary line, such as the Norway-United Kingdom Agreement Relating
to the Delimitation of the Continental Shelf between the Two Countries of
10 March 1965 and its subsequent agreements for the exploitation of Frigg
Field gas and Statfjord Field and Murchison Field petroleum respectively.
(3) To be worked out with the issue of boundary delimitation shelved or kept
unresolved, such as the Japan-Korea Agreement Concerning Joint
Development of the Southern Part of the Continental Shelf Adjacent to the
Two Countries of 30 January 1974, the Malaysia-Thailand Memorandum
of Understanding on the Establishment of a Joint Authority for the Exploitation
of Resources of the Seabed in a Defined Area of the Two Countries in the
Gulf of Thailand of 21 February 1979 (followed by the 1990 Malaysia-
Thailand Joint Development Agreement), and the Australia-Indonesia
Treaty on the Zone of Co-operation in an Area between the Indonesian
Province of East Timor and Northern Australia of 11 December 1989
(now superseded by the 2002 Australia-Timor Leste Agreement).38 The
third type is linked to the provisional arrangements stipulations under the
LOS Convention.
Some existing joint development models are conducive to the initiation and
development of a similar one for the South China Sea. They actually exist all
over the world, from the North Sea model to the Arabic Sea, and from Asia
to Latin America.39 In the East Asian region, joint development is also a mode
of bilateral co-operation between the cousntries concerned, such as the Japan-
37 See Ibrahim F.I. Shihata and William T. Onorato, “Joint Development of International
Petroleum Resources in Undefined and Disputed Areas” in G.H. Blake, M.A. Pratt and C.H.
Schofield (eds.), Boundaries and Energy: Problems and Prospects (London, Kluwer Law
International, 1998), pp. 436–437.
38 Masahiro Miyoshi, “Is Joint Development Possible in the South China Sea?” in Mochtar
Kusuma-Atmadja, Thomas A. Mensah and Bernard H. Oxman (eds.), Sustainable
Development and Preservation of the Oceans: The Challenges of UNCLOS and Agenda 21
(Honolulu, the Law of the Sea Institute, University of Hawaii, 1997), pp. 613–614.
39 For details of some existing cases, see Miyoshi, note 25 above, pp. 7–41.
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JOINT DEVELOPMENT IN THE SOUTH CHINA SEA 93

South Korean Arrangement in the Sea of Japan and the East China Sea in the
1970s, the Malaysia-Thailand Joint Development Area in the Gulf of Thailand
and the Australian-Indonesia Joint Development Zone for the Timor Gap.40
The Japanese-South Korean joint development arrangement was the first as
such in East Asia. The arrangement was based on several agreements signed
between the two countries. It is significant in state practice since it represents
the first application of the idea of joint development of offshore oil where the
parties failed to agree on boundary delimitation.41 Under the agreement, con-
cessionaires who are authorised by the two respective governments have an
undivided interest with respect to each of the nine defined sub-zones, and one
operator is chosen from among the concessionaires so authorised for a partic-
ular sub-zone.42 However, the “operator formula” which shifts applicable law
to the operator from Japan to Korea or vice versa brings inconveniences to the
operator when it transfers its work from one sub-zone to another sub-zone.
The agreement establishes a Joint Commission as a consultative body to
implement the agreement.
China (PRC) strongly protested this “joint development” arrangement and
condemned it as an encroachment on China’s sovereignty.43 It was regarded by
China as invalid, illegal and no binding force on a third state.44 On the other
hand, China stated that the method of delimiting the continental shelf areas in
the East China Sea should be determined by consultation between all the
countries concerned. While it is not clear whether by that statement China
meant a trilateral consultation, it could be interpreted as suggesting a multi-
lateral approach which would be conducive to similar consultations for the
South China Sea disputes. 45 There is an interesting background to this
approach.
Originally the Taiwan Chinese were involved in the discussions of possible
joint development in the East China Sea. In November 1970, a Japan-South
Korea-ROC Liaison Committee was formed and later this organisation was
renamed as the Sino-Japanese-Korea Joint Committee for Ocean Development
Research. However, this co-operation initiative ended in September 1972 when
Taipei withdrew from the committee in the wake of Tokyo’s recognition of
Beijing.46 Should any arrangement have been made between the three sides, it
40 For details, see Shihata and Onorato, note 37 above, pp. 438–441.
41 Miyoshi, note 25 above, p. 1.
42 Miyoshi, ibid., p. 12.
43 See the Statement of the PRC Ministry of Foreign Affairs, 4 February 1974, reprinted in
Law Department of Peking University (ed.), Collected Materials on the Law of the Sea
(Beijing, People’s Press, 1974) (in Chinese), p. 88.
44 See Zhao Lihai, Studies on the Law of the Sea (Beijing, Peking University Press, 1996) (in
Chinese), p. 55.
45 See Masahiro Miyoshi, “International Maritime Boundaries and Joint Development: A Quest
for a Multilateral Approach” in G.H. Blake, M.A. Pratt and C.H. Schofield (eds.), note 37
above, p. 465.
46 Hurng-yu Chen, “The Prospects for Joint Development in the South China Sea”, (1991) 27
Issues and Studies 12, 122.
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94 THE INTERNATIONAL JOURNAL OF MARINE AND COASTAL LAW

would have generated strong repercussions in East Asia, both legally and polit-
ically. One of the reasons why China (PRC) strongly protested the bilateral
arrangement between Japan and South Korea may be attributed to the early
involvement of the Taiwanese side.
What is more significant is the joint arrangement made by three countries—
Malaysia, Thailand and Vietnam—in the Gulf of Thailand for their over-
lapping-claimed sea areas where the three countries agreed in 1999 on establishing
a regime of joint development. When the tripartite accord becomes effective,
it will be the first multilateral agreement on joint development.47 The tripartite
agreement, however, is based on two associated bilateral agreements either
between Malaysia and Thailand or between Malaysia and Vietnam. In 1979,
Malaysia and Thailand signed a Memorandum of Understanding (MOU) to
establish, on an interim basis of 50 years, a Malaysia-Thailand Joint Authority
“for the purpose of the exploration and exploitation of the non-living natural
resources of the seabed and subsoil in the overlapping area”.48 More than 10
years later, the two countries worked out the constitution and other matters
relating to the establishment of such an authority, which provides details of the
operation in the joint zone.49 There are two striking characteristics in this joint
development scheme: a powerful joint authority which decides on the plan of
operation and the work programme to permit operations and conclude trans-
actions or contracts, to approve and extend the period of exploration and
exploitation, to approve the work programme and budgets of the contractor,
and to inspect and audit the operator’s books and accounts;50 and the intro-
duction of a production sharing system which include such terms and condi-
tions as the duration of the contract not exceeding 35 years, the payment of
10 per cent of gross production of petroleum by the contractor to the joint
authority as royalty, 50 per cent of gross production to be applied by the con-
tractor for the recovery of costs, the remainder of gross production to be profit
and divided equally between the joint authority and the contractor, all costs of
operations to be borne by the contractor, and any dispute arising out of the
contract to be referred to arbitration unless settled amicably.51
On the other hand, Malaysia and Vietnam also signed a MOU in 1992 for
joint development in the Gulf of Thailand. Accordingly, Petronas and Petrovietnam
are assigned to undertake respectively petroleum exploration and exploitation
in the “defined area”. The arrangement between the two state-owned oil com-

47 Nguyen Hong Thao, “Vietnam and Joint Development in the Gulf of Thailand”, (2003) 8
Asian Yearbook of International Law 138–139.
48 Text is reprinted in Jonathan I. Charney and Lewis M. Alexander (eds.), International
Maritime Boundaries (Dordrecht, Martinus Nijhoff Publishers, 1993), vol. 1, pp. 1099–1123.
49 See ibid. For further details, see David M. Ong, “The 1979 and 1990 Malaysia-Thailand
Joint Development Agreements: A Model for International Legal Co-Operation in Common
Offshore Petroleum Deposits?”, (1999) 14 IJCML 2, 207–246.
50 See Art. 7 of the 1990 Agreement.
51 See Art. 8 of the 1990 Agreement.
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JOINT DEVELOPMENT IN THE SOUTH CHINA SEA 95

panies made in August 1993 established an eight-member co-ordination com-

mittee to issue policy guidelines for the management of petroleum operations.
This is different from the Thai-Malaysia model in which the joint authority is
appointed directly by the governments. After the conclusion of the commercial
arrangement in July 1997, oil has been extracted from the Bunga Kekwa
field.52 Based on the bilateral arrangements, a tripartite mechanism has been
gradually evolving for an overlapping maritime area.
This practice shows that a form of multilateral joint development is possi-
ble and realistic. It may reasonably be asked that if this form can be applied
in the Gulf of Thailand, why should it not be applicable to the South China
Sea surrounding the Spratly Islands? Secondly, if a multilateral arrangement
amongst all the interested parties is not possible at the beginning, with accu-
mulated bilateral efforts such an arrangement can gradually be evolved.
Finally, in this case, two out of the three co-operative parties are also claim-
ants to the Spratly Islands. Their existing experiences in formulating joint
development mechanisms no doubt help to establish a similar arrangement for
the disputed areas in the South China Sea.

Proposals for Joint Development in the South China Sea

There are some existing studies on joint development in the South China Sea
literature. The British Institute of International and Comparative Law, in its
book, lists the South China Sea as one of the potential areas for joint devel-
opment.53 In the 1980s there were two workshops organised by the East-West
Center in Hawaii, discussing the possibilities of joint development in the
South China Sea. However, though positive in advancing regional co-operation
in the South China Sea, most of the presented papers are focused on geology,
geophysics and hydrocarbon potential in the region, with few papers address-
ing joint development in legal perspective.54 In the 1980 Workshop, the panel
on “Precedents for Joint Development” contains five papers addressing joint
development in the North Sea (by William T. Onorato), in the Persian Gulf
(by Fereidun Fesharaki), in the East China Sea (by Choon-ho Park), in the
Gulf of Thailand (by Prakong Polahan) and in legal aspects (by Masahiro Miyoshi).
The Panel on “Joint Research, Investigation and Development” in the 1983
Workshop contains several papers on joint development including, inter alia,
“The Malaysian Philosophy of Joint Development” (by Datuk Harun Ariffin),
“The Japan-South Korea Agreement on Joint Development of the Continental
Shelf ” (by Masahiro Miyoshi), “Reaching Agreement on International Exploitation
of Ocean Mineral Resources” (by Willy Østreng) and “Joint Jurisdiction and

52 See Nguyen Hong Thao, note 47 above, p. 145.

53 See British Institute of International and Comparative Law, note 28 above, p. 160.
54 The proceedings of the two conferences were later published in (1981) 6 Energy 11 and
(1985) 10 Energy 3/4 as special issues.
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96 THE INTERNATIONAL JOURNAL OF MARINE AND COASTAL LAW

Development in the Southeast Asian Seas” (by Mark J. Valencia). It is to be

noted that the paper presented by Rainer Lagoni at the 1983 Workshop was
later published separately from the conference proceedings.55 Although the dis-
cussions during these two workshops were very preliminary, they provided a
pioneer work for possible joint development in the South China Sea.
The Law of the Sea Institute 29th Annual Conference held in Bali,
Indonesia, in 1995 had a panel on “joint development”. Particularly, a pre-
sented paper entitled “Is Joint Development Possible in the South China Sea?”
is most relevant.56 It raised the question as to whether a multilateral joint
development arrangement was possible for the South China Sea. Since there
had been no precedent for such a multilateral arrangement, the paper made
references to existing multilateral regimes, including the 1967 Treaty on Principles
Governing the Activities of States in the Exploration and Use of Outer Space,
Including the Moon and Other Celestial Bodies, the international sea-bed
regime established by the LOS Convention and the 1988 Convention on the
Regulation of Antarctic Mineral Resource Activities.57 However, while these
agreements are indeed international regimes for sharing resources, they all
relate to the common heritage of mankind, which is substantially different in
nature from the resources in the South China Sea.58 Another paper presented
by Robert Smith also touches possible joint development in the Spratly
Islands. According to him, after freezing the territorial claims, the claimants
would draw hypothetical equidistant lines between the disputed islands and the
surrounding littoral states. Within the zones created by these equidistant lines,
the states concerned could seek to establish various “joint zones” within the
framework of joint development and limited joint development or non-devel-
opment.59 The non-development zones can be marine sanctuaries, such as for
the purpose of protecting coral reefs or applicable to “areas where the num-
ber of competing claims is the greatest”.60
The Timor Gap Treaty has been frequently discussed in the context of pos-
sible joint development in the South China Sea. There is a specific paper on
the Timor Gap model. It is suggested that “instead of creating a single joint
development zone, the claimants should establish twelve separate joint devel-
opment zones for each area of overlapping claims”, with each zone employ-
ing the organisational and decision-making structures utilised in the Timor Gap

55 Rainer Lagoni, “Interim Measures Pending Maritime Delimitation Agreement”, (1984) 78

American Journal of International Law 2, 345–368.
56 Miyoshi, note 38 above, pp. 610–624.
57 Miyoshi, note 38 above, pp. 618–620.
58 For the concept of common heritage of mankind, see Zou Keyuan, “The Common Heritage
of Mankind and the Antarctic Treaty System”, (1991) 38 Netherlands International Law
Review 2, 173–198.
59 Robert W. Smith, “Joint (Development) Zones: A Review of Past Practice and Thoughts on
the Future” in Mochtar Kusuma-Atmadja, Thomas A. Mensah and Bernard H. Oxman (eds.),
note 38 above, p. 661.
60 See ibid.
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JOINT DEVELOPMENT IN THE SOUTH CHINA SEA 97

Treaty.61 The Timor Gap arrangement is by far the most detailed one ever con-
cluded for joint development, as it includes the Treaty on the Zone of Co-
Operation as follows:
Annex A: Designation and Description Including Maps and Co-ordinates of
the Areas Comprising the Zone of Co-Operation;
Annex B: Petroleum Mining Code for Area A of the Zone of Co-Operation;
Annex C: Model Production Sharing Contract between the Joint Authority
and Contractors; and
Annex D: Taxation Code for the Avoidance of Double Taxation in Respect of
Activities Connected with Area A of the Zone of Co-Operation.62
The zone of co-operation is divided into three sub-zones:
• Area A: under joint control;
• Area B: under Australian jurisdiction; and
• Area C: under Indonesian jurisdiction.
However, with the independence of East Timor, this joint development
arrangement has been modified by recent developments. In July 2001, the UN
Transitional Administration of East Timor (UNTAET) and Australia signed a
MOU, which replaced the old arrangement. The new arrangement covers pre-
cisely the same area as Area A of the 1989 Timor Gap Treaty, and is more
favourable to East Timor, for example by increasing its revenue share from the
original 50 per cent to 90 per cent (Article 4(a) of the Timor Sea Arrange-
ment).63 After East Timor had gained full independence, Australia concluded
several additional agreements with East Timor regarding the Timor Sea,
including the Timor Sea Treaty 64 and the Agreement Relating to the
Unitization of the Sunrise and Troubadour Fields,65 further detailing the joint
development arrangement between the two countries. Thus, despite the recent
changes relating to the Timor arrangement, it still remains a good model for
joint development in the world.

61 Lian A. Mito, “The Timor Gap Treaty as a Model for Joint Development in the Spratly
Islands”, (1998) 13 American University International Law Review 762. Others have also
written on the possibility of joint development in the South China Sea, e.g., David M. Ong,
“The Spratlys Dispute Over Marine Resources: Time for a New Approach?”, (1994) 12 Oil
& Gas Law and Taxation Review 11, 352–356; and “Joint Development of the Spratly
Islands’ Marine Resources: Legal Problems and Prospects for Solutions”, (1993) 11 Oil &
Gas Law and Taxation Review 5, 158–164.
62 Texts are reprinted in Charney and Alexander (eds.), note 48 above, pp. 1245–1328.
63 Text of the MOU and its attachment is annexed to David M. Ong, “The New Timor Sea
Arrangement 2001: Is Joint Development of Common Offshore Oil and Gas Deposits
Mandated Under International Law?”, (2002) 17 IJMCL 1, 106–122.
64 It was signed on 20 May 2002 and came into force on 2 April 2003. Text is available at
http://www.austlii.edu.au/au/other/dfat/treaties/2003/13.html (accessed 10 November 2004).
65 It was signed on 6 March 2003. Text is available at http://www.austlii.edu.au/au/other/dfat/
treaties/notinforce/2003/6.html (accessed 10 November 2004).
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Chinese scholars and governmental officials also put forward proposals on

how to launch joint development in the South China Sea. In 1991, the Chinese
Society of the Law of the Sea and the Hainan Association of South China Sea
Research (later evolved as the Hainan Institute for the South China Sea
Research) jointly held a conference on the South China Sea in Hainan, China,
where altogether five papers presented were concerned with joint development
in the South China Sea. The papers discussed the joint development issue from
military, economic, legal, political and regional perspectives.66 It was the first
time in China that joint development in the South China Sea had been deeply
and widely discussed. Eleven years later, in 2002, the Hainan Institute for the
South China Sea Research (renamed since July 2004 as China National
Institute for the South China Sea Studies), a think-tank institution jointly
established by the Hainan Provincial Government and the Ministry of Foreign
Affairs, held a conference on the South China Sea, in particular focusing on
two themes: joint development and the legal status of China’s U-shaped line
in the South China Sea. It is realised that while joint development is unable
to solve the territorial disputes of the Spratly Islands, it can be a useful pro-
visional measure of solving maritime jurisdictional disputes. The term “shelv-
ing the disputes” (gezhi zhengyi) is understood as shelving the disputes over
maritime jurisdiction rather than the disputes over territorial sovereignty.67 It is
pragmatic to adopt a joint development arrangement as a provisional measure
of solving the disputes peacefully and in conformity with the common inter-
ests of China and its neighbouring countries.68 Furthermore, there are some
reasons for the necessity to enter into joint development in the South China
Sea:
(1) All countries adjacent to the South China Sea need a good environment
for their social and economic development, and joint development can sta-
bilise the South China Sea region so that a good environment can be
maintained.
(2) Joint development can lead to effective and rational use of South China
Sea resources and can be a prerequisite to peacefully resolving the South
China Sea disputes.
(3) Joint development can enhance and expand regional co-operation in other
areas.69

66 For relevant papers, see China Institute for Marine Development Strategy, State Oceanic
Administration (ed.), Selected Papers Presented to the Conference on the South China Sea
(Beijing, March 1992) (in Chinese).
67 See Wu Shicun, “Certain Reflections on Joint Development in the Nansha (Spratly) Islands”
in Zhong Tianxiang, Han Jia and Ren Huaifeng (eds.), Proceedings of the South China Sea
Workshop (2002) (Hainan, Hainan Institute for the South China Sea, 2002) (in Chinese),
p. 72.
68 Wu, ibid., p. 73.
69 See Li Guoqiang, “Preliminary Discussion on Joint Development in the South China Sea”
in Zhong Tianxiang, Han Jia and Ren Huaifeng (eds.), note 67 above, p. 134.
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JOINT DEVELOPMENT IN THE SOUTH CHINA SEA 99

According to a government official from the State Oceanic Administration,

although countries like Vietnam, the Philippines, Malaysia and Brunei had
agreed orally to China’s joint development proposal, they do not concede this
in practice. The reason is that their unilateral development activities have not
met serious challenges for a long time so they perceive that there is no need
or necessity to have joint development with China. For that reason, China,
while proposing joint development, may select some areas to create conditions
for joint development, such as through China’s efforts to persuade Vietnam or
the Philippines to consult with China for joint development.70 It is suggested
that China can enter into joint development in the following disputed areas:
Reed Bank (Liletan) (with the Philippines), Brunei-Shaba Basin and James
Shoal Basin (with Malaysia or Brunei), North and West Vanguard Bank
(Wan’an Bei and Wan’an Xi) Basins (with Vietnam).71 In order to attract other
countries to make joint development arrangements with China, China must
create some favourable conditions, such as exploration activities around the
Spratly Islands. Nanwei Tan (Riflemen Bank) is suggested as an ideal place to
begin China’s oil and gas activities since it is located beyond the continental
shelf limits claimed by Brunei, Indonesia and Malaysia, beyond the 200-mile
EEZ limit claimed by Vietnam and beyond the “Kalayaan” claimed by the
Philippines.72 It is said that the successful experiences accumulated from
China’s co-operation with foreign oil companies since the promulgation of the
1982 Regulations on the Exploitation of Offshore Petroleum Resources in Co-
operation with Foreign Enterprises have become favourable factors for joint
development.73 While admitting a possibility of joint development in the South
China Sea, Chinese scholars and governmental officials have realised that
there are still a number of difficulties to be tackled before any joint develop-
ment arrangements can be made. However, influenced by the governmental
policy, they tend to emphasise Chinese sovereignty over all the islands in the
South China Sea (zhuquan shuwo), which may in reality hamper any progress
towards joint development.
Scholars and governmental officials in the ASEAN countries have also expressed
their views on joint development in the South China Sea. Hasjim Djalal, a
senior Indonesian diplomat, once wrote a paper on the relevance of joint
development to the South China Sea.74 Another South-East Asian perspective
was reflected in a paper published by two Philippine scholars as they argued

70 See Liang Jinzhe, “Reflections on Certain Issues of Developing Disputed Areas in the South
China Sea” in Zhong Tianxiang, Han Jia and Ren Huaifeng (eds.), ibid., p. 102.
71 See Liang, ibid., pp. 111–112.
72 See Liang, ibid., pp. 110–111.
73 Lin Zhong, “Scholarly Discussion on China and Joint Development”, (1998) Modern Legal
Science (in Chinese) 1, 75.
74 Hasjim Djalal, “The Relevance of the Concept of Joint Development to Maritime Disputes
in the South China Sea”, (1999) 27 Indonesian Quarterly 3, 178–186.
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100 THE INTERNATIONAL JOURNAL OF MARINE AND COASTAL LAW

that “interest in the concept of joint development stems not only from its rel-
evance to the large number of bilateral maritime boundary disputes in the
region, but from its possible usefulness in the seemingly intractable multiple
claim area of the Spratlys”.75
Other proposals relevant to joint development are those concerning the pos-
sible resolution to the South China Sea issue, in particular the Spratly Islands.
The typical one is put forward by a number of American scholars in a book
entitled “Sharing the Resources of the South China Sea”.76 They advocated
that “[c]reating a regional multinational resource agency to govern at least part
of the Spratly area appears to be the best solution to the present stalemate”.77
After having discussed existing models of multinational co-operation and hav-
ing provided five scenarios for the allocation option regarding the South China
Sea and its resources, the authors proposed to establish a “Spratly Manage-
ment Authority” in which three allocation options regarding the shares for
each claimant are provided: China and Taiwan—52 per cent or 37 per cent or
32 per cent; Vietnam—28 per cent or 20 per cent or 32 per cent; Philippines—
11 per cent or 28 per cent or 32 cent; Malaysia—eight per cent or 14 per cent
or four per cent; and Brunei—one per cent or one per cent or none.78 The
“Authority” has several organs within it: the Council, consisting of the
claimants, regional non-claimants and global maritime powers; below it there
are relevant chambers, secretariat, technical committees and a fiscal commit-
tee.79 The intention of such a proposal is very obvious: to internationalise the
South China Sea issue. While it is constructive for the resolution of the
Spratly dispute, it may not be acceptable by relevant claimants as well as other
ASEAN members. On the other hand, this proposal attempts to offer an over-
all solution to the Spratly disputes without specifically focusing on the dis-
cussion of joint development in the South China Sea per se.

Future Prospects
Though difficulties in realising joint development in the South China Sea exist
and it will take a long time to reach such an agreement among the interested
countries, there are some positive signs that favour a possible joint develop-
ment in the disputed areas there, as the complicated situation in the South

75 Aileen S.P. Baviera and Jay L. Batongbacal, “When Will Conditions Be Ripe? Prospects for
Joint Development in the South China Sea”, (1999) 4 Chronicle 1–2, http://www.up.edu.ph/
cids/chronicle/articles/chronv4n1and2/infocus08baviera_pg3.html (accessed 1 November 2004).
76 Mark J. Valencia, Jon M. Van Dyke and Noel A. Ludwig, Sharing the Resources of the
South China Sea (The Hague, Martinus Nijhoff Publishers, 1997). It was later republished
by the University of Hawaii Press in 1999.
77 Valencia, Van Dyke and Ludwig, ibid., p. 1.
78 Valencia, Van Dyke and Ludwig, ibid., pp. 211, 220–221.
79 Valencia, Van Dyke and Ludwig, ibid., p. 207.
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JOINT DEVELOPMENT IN THE SOUTH CHINA SEA 101

China Sea indicates that joint development may be the only feasible means for
regional co-operation for offshore oil and gas development.80
The first significant development regarding the South China Sea is the sign-
ing by China and all ASEAN member states of the Declaration on the Conduct
of Parties in the South China Sea in December 2002, pledging to explore or
undertake co-operative activities in the South China Sea including:
(a) marine environmental protection;
(b) marine scientific research;
(c) safety of navigation and communication at sea;
(d) search and rescue operation; and
(e) combating transnational crime, including but not limited to trafficking in
illicit drugs, piracy and armed robbery at sea, and illegal traffic in arms,
pending a comprehensive and durable settlement of the disputes in the
South China Sea.81
The modalities, scope and locations, in respect of bilateral and multilateral co-
operation, should be agreed upon by the parties concerned prior to their actual
implementation.82 They should promise to resolve their territorial and jurisdic-
tional disputes by peaceful means, without resorting to the threat or use of
force.
It is worth mentioning that the series of informal workshops on “Managing
Potential Conflict in the South China Sea”, sponsored by Canada (until 2001)
and Indonesia and involving all claimants, had discussed the need for joint
development or joint co-operation in disputed areas at the very beginning since
1990. At its second meeting in Bandung in 1991, the statement of the work-
shop stated that “in areas where conflicting territorial claims exist, the clai-
mant states may consider the possibility of undertaking co-operation for
mutual benefit, including . . . joint development”.83 The Technical Working
Group on Resources Assessment and Ways of Development established
within the workshop framework found the need “to define clearly the area that
could be subjected to joint effort in the multiple claims area around the
Spratly Islands groups, without prejudice to the various territorial or jurisdic-
tional claims in the area”, and “to collect and analyze as much as possible the

80 In a document released in 2002 by the Philippines military, the Philippines realised that it
could develop oil deposits in the Kalayaan Island group since “no sensible foreign investor
would come in because the government cannot guarantee a climate of security to underwrite
their investments”. See “China Accused Over Disputed Spratly Islands”, Energy Compass,
18 July 2002, at http://80-proquest.umi.com.libproxy1.nus.edu.sg (accessed 24 February
2004).
81 Text of the Declaration on the Conduct of Parties in the South China Sea is available at
http://www.aseansec.org/13163.htm (accessed 2 July 2003).
82 Ibid.
83 Hasjim Djalal, note 74 above, pp. 180–181.
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102 THE INTERNATIONAL JOURNAL OF MARINE AND COASTAL LAW

various concepts of joint development that are already existing, particularly in

the region, and to use them, as far as practicable, as models for developing
joint efforts regarding the multiple claims area”.84 In June 1998, a meeting on
non-living resources was convened in Vientianne, where various models of
joint development and possibilities were discussed. They included the
Malaysia-Thailand and Malaysia-Vietnam Agreements, the Indonesian-Australian
Agreement, the China-Japan Fisheries Agreement in the East China Sea, the
Argentine-United Kingdom Agreement in the South-West Atlantic, and the
Antarctic Treaty.85 Those models indicate that once agreement is reached on
the need, it will take a lot of time and efforts to conclude the joint develop-
ment arrangement.86 The Vientianne meeting also observed that the concept of
joint development should not be limited to the development of non-living resources.
There were attempts in 1993–94 to outline an “area of a zone” for joint devel-
opment. After several consultations, some claimants were happy with the sug-
gestion, some had reservations but were willing to discuss it, and some
rejected it immediately.87 After all these constructive discussions, it appears
possible that the “area” could start with a relatively small area involving not
so many parties,88 based on a non-official arrangement, including private com-
mercial companies. Joint co-operation in less controversial matters such as
marine scientific research, marine environmental protection and ecotourism can
lead to joint resources exploration and exploitation.89 However, through the
discussions at the workshop, some difficulties in joint co-operation and devel-
opment exist, such as the difficulty in clearly defining the disputed area since
it is difficult to precisely know which areas are being claimed by certain coun-
tries and the difficulty in interpreting the concept of joint development, as
there is a strong tendency among the claimants that joint development should
not be attempted in an area which a claimant believes to be its own, and that
the concept should only be used in an area claimed by others or for an area
outside its claims.90 Despite the existing difficulties, the discussions in the
workshop have provided some basis for further discussions among the inter-
ested parties regarding a possibility to formulate a joint development arrange-
ment in the South China Sea.
Secondly, China’s position on joint development is very favourable. Encouraged
or triggered by relevant developments in East Asia, China also put forward the
idea of joint development in the disputed sea areas. As early as 1980s, Deng

84 Cited in Djalal, ibid., p. 182.

85 Djalal, ibid., p. 183.
86 Djalal, ibid., p. 183.
87 Djalal, ibid., p. 185.
88 Participants in the joint development plan should be those which are directly interested par-
ties and which are maintaining presence in the area. Djalal, ibid., p. 185.
89 See Djalal, ibid., p. 185.
90 See Djalal, ibid., p. 186.
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JOINT DEVELOPMENT IN THE SOUTH CHINA SEA 103

Xiaoping, the former paramount Chinese leader, made the famous statement
regarding China’s policy towards disputed areas in China’s adjacent seas by
joint development. Deng regarded “joint development” as one of the two most
important peaceful means for international dispute resolution.91 Since then,
China has been pushing very actively to realise the goal of joint development
and has reiterated its proposal on many international occasions. In 1990 Li
Peng, former Chinese Prime Minister, during his visit to Malaysia, expressly
put forward the joint development proposal as “shelving the disputes and
developing jointly” (gezhi zhengyi, gongtong kaifa).92 Since then the Chinese
Government has reiterated this proposal on many occasions when the Spratly
issue was raised and it has remained unchanged up to date, for example, when
Wu Bangguo, Chairman of the National People’s Congress, during his visit to
the Philippines in August 2003, proposed to his Philippine counterpart to
jointly develop petroleum in the South China Sea.93
China’s efforts proved not to be a waste in the end. On 11 November 2003,
the CNOOC and the Philippine National Oil Company agreed to jointly
explore oil and gas in the South China Sea through a letter of intent between
the two sides. A joint committee will be set up to help select exploring areas
in the South China Sea. They also agreed to a programme to “review, assess
and evaluate relevant geographical, geophysical and other technical data avail-
able to determine the oil and gas potential in the area”.94 As said by the
Philippine side, the joint exploration will be conducted in the North-West
Palawan offshore area, “not even close enough to the Spratlys”.95 As a follow-
up, the two state oil companies signed an agreement on joint seismic work in
the Sino-Philippine disputed area in the South China Sea, which is the first
joint development agreement for the disputed area.96 In the Joint Communiqué
between China and the Philippines issued in September 2004, the two sides
emphasised the importance in maintaining peace and stability in the South
China Sea and continuing the discussion of “joint development”.97 According
to China, the Sino-Philippine Agreement is an important undertaking in the
implementation of the 2002 Declaration by the two countries, and China is

91 The other is “one country, two systems”. See Selected Works of Deng Xiaoping, vol. 3,
p. 87.
92 See People’s Daily (in Chinese), 14 December 1990.
93 “Wu Bangguo Proposes a Multiple Co-Operation For Oil in the Spratly Islands”, Lianhe
Zaobao, 1 September 2003.
94 “Chinese, Philippine Firms Join Forces to Look For Oil in South China Sea”, Agence
France Presse, 13 November 2003.
95 “RP-China Oil Exploration”, Business World, Manila, 12 November 2003.
96 See “China and the Philippines For the First Time Jointly Explore South China Sea
Resources Without Drilling and Exploitation”, Jinghua Shibao (Beijing-China Times) (in
Chinese), 4 September 2004, p. A02.
97 See “The Joint Communiqué of the Government of the People’s Republic of China and the
Government of the Republic of the Philippines”, People’s Daily (in Chinese), 4 September
2004, p. 3.
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104 THE INTERNATIONAL JOURNAL OF MARINE AND COASTAL LAW

also willing to discuss ways and means of joint development with other
ASEAN countries including Vietnam.98 Further developments took place when
state-owned oil companies in China, the Philippines and Vietnam signed an
unprecedented tripartite agreement on joint seismic surveying activities in the
South China Sea on 14 March 2005. The size for co-operation is 143,000
km2.99 While there is an initial agreement between the three countries, there is
still some jeopardy that such an agreement might not be executed in prac-
tice or would fail in the end. It is recalled that China and Russia signed an
agreement to build an oil pipeline from Angarsk in East Siberia to Daqing in
North-East China, but the Russian side may change its original position by
cancelling this project.100 We will just have to wait and see whether the agree-
ment between China and the Philippines will encounter the same fate as the
Angarsk-Daqing proposed project in the end.
Thirdly, in addition to the joint development arrangements addressed above,
East Asian countries have also concluded bilateral agreements concerning mar-
itime boundary delimitation and on fishery management, which can provide
some basis for possible joint development arrangements. Taking China as an
example, it has concluded three fishery agreements respectively with Japan (1997),
South Korea (2000) and Vietnam (2000) and a maritime boundary agreement
with Vietnam (2000). All three fisheries agreements have established joint
fishery management zones in the Yellow Sea (with South Korea), the East
China Sea (with Japan) and the Gulf of Tonkin (with Vietnam).101 The co-oper-
ative experiences accumulated from fishery resource management will no
doubt enhance joint co-operation in the management of non-living resources.
It may be recalled that the initial step for the joint development arrangement
between Australia and Indonesia in the Timor Sea was the conclusion of the
MOU for a provisional fisheries surveillance and enforcement in October
1981.102 In this sense, the bilateral fisheries arrangements can become the basis
for countries concerned to make joint development arrangements.
More significant are agreements concerning maritime boundary delimitation
since joint development is usually invoked in state practice as a provisional
measure pending the settlement of boundary delimitation. In this sense, the
2000 Agreement on the Maritime Boundary Delimitation in the Gulf of Tonkin

98 See “Ministry of Foreign Affairs: China Seriously Requests Vanuatu To Keep Its Promise on
Taiwan”, 18 November 2004, at http://www.people.com.cn/GB/shizheng/1027/2997844.html
(accessed 19 November 2004).
99 See “China, Philippines and Vietnam Sign Agreement To Explore Oil in the South China
Sea”, Lianhe Zaobao, 15 March 2005, at http://www.zaobao.com/gj/yx501_150305.html
(accessed 15 March 2005).
100 See Xie Ye, “Crude-Oil Quandary Causes Concern”, China Daily, 24 February 2004.
101 For relevant details, see Zou Keyuan, “Sino-Vietnamese Fishery Agreement for the Gulf of
Tonkin”, (2002) 17 IJCML 1, 127–148; and “Sino-Japanese Joint Fishery Management in
the East China Sea”, (2003) 27 Marine Policy 2, 125–142.
102 Text is reprinted in Charney and Alexander (eds.), note 48 above, pp. 1238–1239.
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JOINT DEVELOPMENT IN THE SOUTH CHINA SEA 105

Between China and Vietnam is notable. In addition to the settlement of the

maritime boundary issue in the Gulf of Tonkin permanently, it reflects the idea
of joint development of mineral resources in the gulf as it provides that:
In case any single geophysical structure of oil and gas or other mineral deposits
straddles the demarcation line as provided in Article 2 of this Agreement, the
Parties shall, through friendly consultation, reach an agreement on developing the
structure or deposit in the most effective way as well as on equal sharing of
the profits resulting from the development.103
This indicates that though for the time being there is no imminent prospect for
the two sides to carry forward any type of joint development of petroleum
resources in the Gulf, it leaves an opportunity for future co-operation through
the boundary agreement. It may be recalled that the early Sino-Vietnamese
boundary negotiations in the 1970s initiated by Vietnam were actually trig-
gered by the prospect for oil and gas in the Gulf when Vietnam intended to
grant the exploration right for some sedimentary blocks in the Gulf to an
Italian oil company. In the 1980s Vietnam proposed that the two countries
undertake a joint development programme in the Gulf of Tonkin.104 With the
entry into force of the Agreement from 1 July 2004, a joint development
arrangement for non-living resources in the Gulf of Tonkin can be negotiated
whenever the two sides consider it a need based on the above provision.
There are also further concerns and considerations in relation to the reali-
sation of the joint development idea. First, China’s behaviour sometimes wor-
ries South-East Asian countries. Whether or not the smaller claimant countries:
will have the confidence to negotiate a settlement of the disputes, enter into provi-
sional co-operative arrangements, or feel the need instead to beef up their defence
capabilities and unilaterally strengthen their respective positions, depends in large
part on what they see as China’s policy and posture towards the issue.105
China’s previous insistence in bilateral talks on the Spratlys issue has in fact
blocked the way to seeking any possible joint development on a multilateral
basis. However, the recent change of China’s posture, from sticking to bilat-
eral talks to accommodating the whole ASEAN region, has paved the way for
reaching a joint development arrangement in the future. Though with some
reluctance, China has realised that regionalisation of the Spratlys issue is inevitable
and may help break the deadlock in the resolution of the disputes.

103 Art. 7 of the 2000 Boundary Agreement. An unofficial English version of this Agreement is
attached to Zou Keyuan, “Sino-Vietnamese Agreement on the Maritime Boundary
Delimitation in the Gulf of Tonkin”, (2005) 36 Ocean Development and International Law
13–24.
104 See Epsey Cooke Farrell, The Socialist Republic of Vietnam and the Law of the Sea: An
Analysis of Vietnamese Behaviour within the Emerging International Oceans Regime (The
Hague, Martinus Nijhoff, 1998), p. 251.
105 Baviera and Batongbacal, note 75 above, p. 3.
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106 THE INTERNATIONAL JOURNAL OF MARINE AND COASTAL LAW

Secondly, joint development is mainly used as an interim measure pending

the settlement of territorial and/or maritime disputes. Joint development can
help to stabilise the status quo of the disputed area, and may finally lead to a
permanent dispute resolution. Until such a resolution becomes fact, the dis-
putes will be still there. It may on the other hand affect from time to time the
effective implementation of any joint development arrangement.
Thirdly, it is to be noted that all the claimant states surrounding the South
China Sea are developing countries with rapid economic growth, which will
be accompanied by an increasing demand for energy. It is estimated that oil
demand for Asian nations will increase from about 14.5 million barrels per
day in 2000 to nearly 29.8 million barrels per day by 2025.106 The demand for
energy and increased energy consumption will definitely make the claimants
more actively involved in oil and gas exploration and exploitation in the South
China Sea. This on the one hand may cause more conflicts amongst the
claimants if any of them conduct unilateral petroleum activities in the disputed
maritime area; but on the other it could create a window of opportunity for
joint development when the claimants realise that a unilateral act becomes a
costly, disturbing and unfeasible option.
Fourthly, it is clear that joint development between two states in areas with
multiple claims causes problems. It may be recalled that when Japan and
South Korea signed the joint development agreement for the East China Sea,
this invited furious protests from China. The recent move between China and
the Philippines regarding the possible joint development in the South China
Sea met with protests from Vietnam, at least. For that reason, joint develop-
ment in the South China Sea launched by only two claimant countries is not
a wise option. On the other hand, joint development proposals at the bilateral
level may not always be welcomed by relevant claimants. It may again be
recalled that China once proposed to have a joint development with Vietnam
for the Vanguard Bank where part of the area was a concession given to
Crestone by China, but Vietnam rejected China’s proposal on the ground that
the area is close to Vietnamese coastlines and within the limits of its conti-
nental shelf.107
A new model for potential joint development in the South China Sea can
thus be designed, which comprises China (including Taiwan) as one party and
ASEAN (including all 10 member states) as the other party. This model is
based on the existing formula of the Declaration on the Conduct of the Parties
in the South China Sea, which has been signed by China and ASEAN mem-
bers. If this can stand, then a bilateral but with multiple-parties co-operation

106 See “South China Sea Region”, Country Analysis Briefs, September 2003, at http://www.eia.
doe.gov/emeu/cabs/schina.html (accessed 4 October 2004).
107 Djalal, note 74 above, p. 180.
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JOINT DEVELOPMENT IN THE SOUTH CHINA SEA 107

between China and ASEAN in the South China Sea can be formulated. Of
course, some scholars have already expressed their concerns about whether the
interests and rights of China (including Taiwan) can be guaranteed in the
future joint development scheme. Hurng-yu Chen, a Taiwanese scholar,
warned that:
[w]hat Chinese should remember before they enter into any joint development
agreement is that Taipei and Peking occupy far fewer islands than either Vietnam
or the Philippines, and joint development with these countries might well prejudice
Chinese rights and interests.108
However, with a co-operative framework between China and ASEAN, the
interests of all the parties concerned may well be assured. The bilateral
scheme of joint development is foreseeable and backed up by a number of
favourable factors.
On the Chinese side, both mainland China and Taiwan have taken similar
political and legal positions on the South China Sea issue based on the same
historical evidence and reasons on most occasions and have never launched
any challenge against each other regarding the territorial sovereignty over the
South China Sea islands.109 The presence of mainland China (PRC) in the
Spratly Islands is largely due to the preceding presence of Taiwan (ROC) there
by having occupied the largest island of Taiping within the Spratlys. On the
other hand, the co-operation between the two sides across the Taiwan Strait
regarding petroleum exploration and exploitation has already begun. As early
as July 1996 the Taiwan Chinese Petroleum Corporation (CPC) and the main-
land China Offshore Oil Corporation signed an agreement on exploration for
the Tainan Basin and Zhaoshan sunken area, which was finally approved by
both sides in April 1998.110 A joint venture agreement was signed between the
two companies in May 2003 and the CPC received approval in March 2004
to open representative offices in Shanghai and Beijing.111 As to the utilisation
of the mineral resources in the South China Sea, the two sides across the
Taiwan Strait can make some form of co-operation and consultation based on
their previous joint development experiences in the Taiwan Strait as well as in
the sea areas around the Pratas Islands.
On the ASEAN side, a concerted and unified policy towards the South
China Sea has been in existence since 1992 when ASEAN member states
issued the Declaration on the South China Sea, which expressed their re-
solve to explore the possibility of co-operation in the South China Sea and to

108 Hurng-yu Chen, note 46 above, p. 125.

109 See Wu Shicun, note 67 above, p. 76.
110 See People’s Daily (in Chinese), 1 June 1998.
111 See “Taiwan”, Country Analysis Briefs, at http://www.eia.doe.gov/emeu/cabs/taiwan.html
(accessed 8 November 2004).
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108 THE INTERNATIONAL JOURNAL OF MARINE AND COASTAL LAW

establish a code of international conduct there.112 In 1995, the ASEAN foreign

ministers reiterated the letter and spirit of the 1992 Declaration.113 ASEAN as
a whole signed the 2002 Declaration with China. Following this trend, joint
development such as between China and ASEAN could be at least one of the
feasible options for the South China Sea claimants to consider seriously.
Fifthly, even if there is a chance of joint development in the South China
Sea, difficulties still remain to be tackled. How to create such a mechanism
and how to reflect the representation of each claimant in the joint management
authority remains a problem at a technical level. Questions such as whether
the authority includes an equal number of representatives from each claimant
state, or whether the allocation of rights and profits should be based on the
number of islands each nation occupies, or whether they should be divided
equally114 have been already posed in the South China Sea literature. It is
pointed out that the “process of identifying the common interests of the
claimant states is an essential prerequisite to the consideration of JDZ (joint
development zone) proposals”.115
Finally, it is to be noted that the gist of joint development is economically
oriented for the purpose of obtaining economic benefits from resources devel-
opment. However, with the deterioration of the marine environment and
heightening of environmental awareness, joint development for pure economic
benefits may not be a priority in the context of sustainable development. For
that reason, the model of moratorium for resources development, which has
been practised in Antarctica,116 should be considered by all the claimants to the
South China Sea. A joint protection zone, to be established for the disputed
Spratly Islands and surrounding seas, may be even better than a joint resources
development zone.

Conclusion
It is predicted that some kind of joint development, in no matter what form,
can be arranged for the disputed area in the South China Sea provided that all
the interested parties have the intention and good will to exert necessary
efforts in reaching the agreement. The existing state practices in East Asia
concerning joint development, in particular the tripartite one in the Gulf of
Thailand, are good examples that show that joint development is not totally

112 “ASEAN Declaration on the South China Sea”, Manila, Philippines, 22 July 1992, at
http://www.aseansec.org/5233.htm (accessed 27 October 2004).
113 “Recent Developments in the South China Sea”, 18 March 1995, at http://www.aseansec.org/
5232.htm (accessed 27 October 2004).
114 See Hurng-yu Chen, note 46 above, p. 125.
115 Baviera and Batongbacal, note 75 above, p. 4.
116 A moratorium for at least 50 years has been imposed within the Antarctic Treaty System
through the 1991 Protocol on Environmental Protection on Mineral Resources Activities in
Antarctica. For details, see Zou Keyuan, “Legal Thinking on the Comprehensive Protection
for Antarctica”, (1991) Peking University Law Journal (in Chinese) 4, 36–39 and 56.
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JOINT DEVELOPMENT IN THE SOUTH CHINA SEA 109

alien in East Asia. While there are a number of difficulties and issues, the win-
dow of opportunity always remains open. Based on the recently signed Declaration
Between China and ASEAN Countries, the window is now open even wider.
Once a form of joint development has been reached amongst the countries
concerned, long-term peace and security in the South China Sea can definitely
be guaranteed, which may lead positively to the final settlement of the terri-
torial and maritime disputes in the area.
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