Resolving The West Philippine Sea Dispute

1
I.
INTRODUCTION
A. BACKGROUND OF THE STUDY
1. Factual Antecedents
a. The period when there is no opportunity for negotiations
The JMSU and the Baseline Law

In 2005, a tripartite agreement to explore the 142,886 square kilometers of the
West Philippine Sea (WPS) was entered into by the Petron, China National Offshore
Oil Company and PetroVietnam.1 The agreement was not renewed and expired in July
1, 2008.2
In March 10, 2009, President Gloria Macapagal-Arroyo signed the controverted
baseline bill, which included, as part of the Philippine territory, the Scarborough Shoal
and the Spratly Islands.3 This, according to Vietnam, further made the relations of the
1 ERNEST BOWER, THE JMSU: A TALE OF BILATERALISM AND SECRECY IN THE SOUTH CHINA SEA 1.
2 Delon Porcalla, JMSU deal under review, The Phil. Star, Sept. 17, 2008, available at
http://www.philstar.com/microsite/noynoy_aquino_inauguration_2010/article.aspx?
articleId=401015&publicationSubCategoryId=63 (last accessed 25 June 2012).
3 Vietnamese Ministry of Foreign Affairs, Vietnams response to Philippine Presidents signing of the
Baseline Act. 12 March 2009, available at http://www.mofa.gov.vn/en/tt_baochi/pbnfn/ns090313185641
(last accessed 16 June 2012).
2
Philippines with Vietnam4 and, logically, with other claimants, worse. Vietnam added
that the bill that turned into a law is against the trend of cooperation in the region.5
Harassment of Philippine Exploratory Vessel by China
In the past, China prevented the exploration team commissioned by the
Philippines.6 The exploration team is group of experts sent by the Philippines to
determine the amount of oil and natural gas. 7 China justified these acts of aggression as
an act to protect its territory.8 It claims that the provision on continental shelf and EEZ
under the UNCLOS justifies its territorial claim over the entire West Philippine Sea.9
4 Id.
5 Id.
6 John Brinsley and Patrick Harrington, China Naval Action Draws Growing Protests from Japan,
Vietnam, Philippines, BLOOMBERG, 9 March 2011, available at http://www.bloomberg.com/news/201103-09/japan-protests-after-chinese-helicopter-buzzes-destroyer-in-east-china-sea.html (last accessed 15
June 2012).
7 Petro.in, Technology & Process, available at http://www.petro.in/ic/tp/tp.html (last accessed 15 Jun

2012).
8 Nong Hong, Post-2002 Development in the South China Sea: Seeking for Confidence Building &
Regional Cooperation, 2 (1) THE JOURNAL OF DEFENCE AND SECURITY, 54, AT 64 (2011).
9 East Asia Forum. The China-Philippines dispute in the South China Sea: does Beijing have a
legitimate claim?, 28 March 2012, available at http://www.eastasiaforum.org/2012/03/28/the-chinaphilippines-dispute-in-the-south-china-sea-does-beijing-have-a-legitimate-claim/ (last accessed 16 June
2012).
3
The Stand-off
Two Chinese maritime surveillance vessels Zhonggou Haijian 75 and Zhonggou
Haijian 84 had a confrontation with the Philippine Navys BRP Gregorio del Pilar last
April 10, 2012.10 The Philippine vessel caught Chinese fishermen illegally exploiting
corals, giant clams and live sharks.11 Since such acts are illegal under the Philippine
law, the Philippine Navy also tried to arrest the other fishermen. 12 To prevent the
allegedly illegal arrest, the Chinese vessels rushed to the location of the other Chinese
fishermen and placed themselves between the Philippine Navy vessel and the fishing
vessel . . . .13
b. The period when there is a slight opportunity for
negotiations
Talks between the Heads of State
10 Philippine Star. Philippine warship in standoff with Chinese vessels, PHIL. STAR, 11 April 2012,
Available at http://www.philstar.com/nation/article.aspx?publicationsubcategoryid=63&articleid=795956
11 Id.
12 Id.
13 Id.
4
A fishing ban was posted by the Chinese administration over some parts of the West
Philippine Sea.14 Although the Philippine President did not elaborate the contents of the
ongoing talks between China and the Philippines, he confirmed that there are peaceful
negotiations between the two States.15 He also confirmed that various legal solutions
by different legal think-tanks were proposed.16 More importantly, he confirmed that
this time, the negotiations were gaining a definite destination.17
Newly Appointed Diplomatic Agent to China
Sonia Brady is the newly appointed Philippine Ambassador to China after the
former Ambassador, Commission on Appointments did not consent to the appointment
of Domingo Lee.18 Brady is a retired career foreign service officer 19 and considered to
14 Chichi Conde, Philippines, China move to ease tensions in Scarborough, INTERAKSYON, May. 14,
2012, available at http://www.interaksyon.com/article/31851/philippines-china-move-to-ease-tensionsin-scarborough (last accessed 24 June 2012).
15 Id.
16 Id.
17 Id.
18 Aurea Calica. Brady expected to breakthroughs in negotiations with China, available at

http://www.philstar.com/Article.aspx?articleId=813142&publicationSubCategoryId=63 (last accessed 16
June 2012).
19 Id.
5
be a veteran diplomat who is already familiar with the politics and the culture of
[China].20 The proponent believes that without an Ambassador, the negotiation will be
delayed again since the Philippines will again become unrepresented.
c. The period when the conflict is beginning to rise again
China Pursued Plans on Drilling Oil Near the EEZs of the Philippines
Despite the growing tension between China and the Philippines, the former still
remained steadfast in its intent to harness the oil and natural gas locked inside the deep
seabed of the WPS. Last May 9, 2012, China, through its State-owned oil company,
Chinese National Offshore Oil Corporation (CNOOC), started drilling in an area
within the WPS, 320 Kilometers from Hong Kong.21
Although the drilling site is not within the EEZ of the Philippines, this move of
China is significant. The proponent believes that if oil and/or natural gas are indeed
found in that area near the EEZ of the Philippines, it is highly probable that oil and/or
natural gas can also be located within the Philippines EEZ. This inference is not
baseless. An oil or natural gas reserve is a large basin-like cavity in the deep seabed
containing oil and/or natural gas.22 Therefore, if indeed there is oil in the current
20 Agence France-Presse, Sonya Brady named to old post as ambassador to China, INTERAKSYON, May
26, 2012, available at http://www.interaksyon.com/article/32944/sonya-brady-named-to-old-post-asambassador-to-china (last accessed 24 June 2012).
21
China.org.cn, Deep-water
drilling beings in S. China Sea,
available
http://www.china.org.cn/business/2012-05/09/content_25339532.htm (last accessed 21 June 2012).
22 See FORUM ENERGY PLC, ANNUAL REPORTS & ACCOUNTS 2.
at
6
Chinese drilling site, then there is a possibility that the oil and natural gas reserve
crosses the EEZ of China and find itself also located within the EEZ of the Philippines.
Nonetheless, China remained silent on whether they intend to continue
exploring beyond its EEZ.23 The decision to do so may be distant but possible. When
this happens, another zone of conflict shall be created in addition to the conflict in the
Spratly islands.
d. The Current Geo-Political Situation
Recent news revealed that the President, through Senator Antonio Trillanes IV,
resorted to backchanneling.24
A back channel has been defined as a secret,
unofficial, or irregular means of communication.25 Senator Trillanes justified his

actions by saying that this move of the President enabled us to normalize the situation
with China without even ceding anything.26
23 Reuters, China tests troubled waters with $1-billion rig for South China Sea, INTERAKSYON, June 21,
2012, available at http://www.interaksyon.com/article/35443/china-tests-troubled-waters-with-1-billionrig-for-south-china-sea (last accessed 24 June 2012).
24 Gil Cabacungan, Aquinos back channel to China is Trillanes, Philippine Daily Inquirer, September
19, 2012, available at http://globalnation.inquirer.net/50558/aquinos-back-channel-to-china-is-trillanes
(last accessed 3 November 2012).
25 Merriam-Webster, Back channel available at http://www.merriam-webster.com/dictionary/back

%20channel (last accessed 3 November 2012).
26 Cabacungan, supra note 24.
7
The proponent is of the opinion that this news about the backchanneling efforts
of the Aquino administration supports the position that Chinas aggression is to thwart
any impression that it is weaker than other nations. The proponent opines that the
Philippine media has been too noisy about the WPS dispute to the extent that any sign
of China backing down from its claim will create an impression that China gives in to
the claims of the Philippines.
The Philippines is not the only country that is being bullied by China. China
also takes an aggressive stance against Japan. 27 Even though the ownership over the
disputed territory remains unresolved, the Japanese Coast Guard recently reported that a
Chinese maritime surveillance ship was spotted near the disputed islands. 28 China, on
the other hand, justified this incursion by saying that the reported Chinese vessels are
only doing their patrol within the territory of China.29
Chen Jie explains Chinas aggressive stance against the Philippines and other
neighboring nations. She explains that:
. . . it is embedded in the Chinese national psyche that the Spratly
archipelago has been part of the motherland's territory since ancient times,
and the Chinese do not see themselves as 'joining" the claim to the Spratlys
with the end of the Cold War. In their eyes, the nature of the dispute is
27 Martin Fackler, China Patrol Ships Pressuring Japan Over Islands, The New York Times, November
2, 2012, available at <http://www.nytimes.com/2012/11/03/world/asia/china-keeps-up-pressure-on-japanover-disputed-islands-with-patrols.html?pagewanted=all&_r=0> (last accessed November 3, 2012).
28 Id.
29 Id.
8
crystal clear: initially taking advantage of China's turbulent domestic
politics and its preoccupation with superpower threats, regional countries
have occupied China's islands and reefs, carved up its sea areas, and looted
its marine resources. While other regional countries perceive China in
recent years as aggressive and provocative in the South China Sea, Beijing
intrinsically sees its assertive policy as a long-overdue and legitimate action
to protect its territorial integrity. Conceptually and theoretically, until its
sovereignty over the entire Spratly archipelago is recognized, China
regards itself as a victim of regional countries' aggression and
encroachment.30 (Emphasis supplied)
If Chen Jies perception is to be adopted, Chinas aggression is only a rational

reaction towards the Philippines enactment of Republic Act 9522, which can be
considered as an open declaration of its claim over the West Philippine Sea. As Chen
Jie explained, China does not want to be victimized again by other States.31
Chen Jie also explained that the islands are not susceptible to development. 32
China, therefore, intends to harness the oil and fishery resources of the Spratly islands
and not to occupy the islands.33
If such is the intention of China, then resolving the WPS dispute is possible.
Later in this study, it will be shown that the Chinese government gets its income from
fees and royalties. In contrast, the Philippine government gets its income from selling
30 Chen Jie, Chinas Spratly Policy: With Special Reference to the Philippines and Malaysia, 34 ASIAN
SURVEY 893 (1994).
31 Id.
32 Id. 895.
33 Id.
9
the extracted oil after paying the contractor its investment and reasonable profit. This
two contrasting legal regimes makes it legally possible for both States to co-exist and
operate together without losing their normal income.
In summary, Chen Jie reveals that China does not intend to start a war with its
neighboring countries. Moreover, the later part of this study will reveal that it is not
legally impossible for both States to operate together. If the geo-political situation
between the Philippines and China is seen under this light, it cannot be denied the
proposition of this study that both the Philippines and China conclude a JDA is not
impossible.
2. Legal Developments
a. JDA becoming an Instrument of Economic Development
Much focus has been given to concluding a final delimitation agreements under
Article 74, paragraph 1 of the UNCLOS rather than concluding provisional agreements
under Article 74, paragraph 3 of the same Convention. 34 This study proposes that, in
times like this, a provisional agreement is more effective than a permanent one.
Joint Development Agreements (JDA) are provisional agreements referred to
under the UNCLOS.35 It does not tackle the issue of ownership of the territory. In
general, it contains provisions governing the rights and responsibilities of the parties in
34 DOMINIC ROUGHTON, THE
IMPLICATIONS OF THE
RIGHTS (AND WRONGS) OF

GUYANA/SURINAME ARBITRATION 9.
35 See Chapter II (B) (3).
CAPTURE: INTERNATIONAL LAW AND THE
10
conducting an exploration and exploitation activity within the disputed area.
Provisional arrangements like the JDA shall be without prejudice to the final
delimitation.36
There is currently a debate regarding the existence of customary international
law requiring States in dispute to conclude a JDA with other disputing States. 37 The
affirmative side believes that there is a custom requiring States to conclude a JDA if
their territorial boundaries overlap. The custom was primarily created in accordance
with the rule prohibiting States from unilaterally appropriating the resources within the
disputed area.38 On the other hand, the opposition side mainly relies on the absence of
opinio juris that is constitutes of a custom.39
Whether or not there is a custom requiring the conclusion of a JDA, there is
another duty provided under Article 74 of the UNCLOS, which is to negotiate in good
36 Convention on the Law of the Sea, Dec. 10, 1982, Article 74 3, 83 3 1833 U.N.T.S. 3.
[hereinafter UNCLOS].
37 See Nguyen Hong Thao, Joint Development in the Gulf of Thailand, IBRU BOUNDARY
AND
SECURITY BULLETIN 79, at 85 (Autumn 1999).
38 William T. Onorato. Apportionment of an International Common Petroleum Deposit. 26 (2) THE

INTERNATIONAL AND COMPARATIVE LAW QUARTERLY, 324, 337 (APR. 1977).
39 David M. Ong, Joint Development of Common Offshore Oil and Gas Deposits: Mere State
Practice or Customary International Law? 93 (4) THE AMERICAN JOURNAL
771, 793 (OCT., 1999) [hereinafter Ong].
OF INTERNATIONAL
LAW
11
faith.40 Article 74 provides that States must make every effort to conclude provisional
arrangements of practical nature. However, the broad language used in Article 74 of
the UNCLOS creates an issue of whether the said provision is binding. The alleged
lack of standards deprives the Philippines a means to compel China to negotiate.
b. JDA becoming an Instrument of Maintaining Peace
Christine Bell coined the term lex pacificatoria or the law of the peacemaker.
According to her, the aim of lex pacificatoria is to end interstate and intrastate conflict.
Bell illustrates Lex Pacificatoria in the manner stated below:
The lex pacificatoria at its deepest has been illustrated to constitute a new
set of relationships between states, their nonstate armed opponents and a
range of third party states, international organizations and NGOs, in the
form of an internationalized transitional constitution, and hybrid transitional
regime.41
Bell further explained that a peace agreement in accordance with lex

pacificatoria is not determinative of a particular constitutional outcome. 42 In short,
they are meta-constitutional laws that regulate the relations of the parties.43
40 See Chapter IV (A) (1).
41 CHRISTINE BELL, ON THE LAW OF PEACE: PEACE AGREEMENTS
42 Id.
43 Id., 5-6, 9.
AND THE
LEX PACIFICATORIA 293.
12
In this aspect, JDAs are like peace agreements. Both types of agreements
contain compromises that the participating States must make. 44 Both agreements face
the problem of making sure that they are legally-sound. 45 More importantly, both
agreements are written like a framework agreement..46
However, JDAs and peace agreements are two different agreements. Entering
into a JDA is a form of compliance with an international obligation. In effect, a JDA
only prevents the conflict between States from being created and does not end a
territorial dispute. In contrast, a peace agreement is not an obligation of a State under
any international law. Consequently, entering into a peace agreement is not a form of
compliance to any rule or law. And unlike a JDA, a peace agreement ends a preexisting conflict.47 In other words, a peace agreement is not a provisional but a final
agreement between the parties.
In summary, JDAs are not totally the same as peace agreements following the
lex pacificatoria. A JDA is a preventive measure while a peace agreement is a mode of
dispute resolution.
44 Id., 5-6.
45 Id.
46 Id.
47 Id.
Consequently, it would be inappropriate to strictly apply the
13
emerging rules under lex pacificatoria in creating a JDA. The issue of whether a JDA
must be formed between China and the Philippines should not be affected by the lack of
concrete legal basis under international law of lex pacificatoria.
With this in mind, the proponent broadly structures this study in this manner:
first, the study will determine whether there is an existing international obligation;
second, the study will interpret the meaning of the obligation using the Vienna
Convention on the Law of Treaties; and third, the study will determine whether there is
compliance with the obligation.
B. STATEMENT OF THE PROBLEM
Is there a duty to conclude a joint
development agreement (JDA) over the
petroleum resources in the disputed area?
States have gained the ability to utilize the resources of the deep seabed. 48 With
this newfound capacity coupled with the necessity of having large supply of oil and
natural gas, States can no longer ignore the territorial claims over uninhabitable areas of
the seas. However, States cannot just appropriate for itself the resources because
disputing legal claims must be resolved first before the resources can be appropriated.49
Resolving a dispute through conventional means is long and difficult. As an
alternative, a provisional solution is provided for by international law. The UNCLOS
48 BBC News & Canada. Oil industry double checking deep drilling safety, available at
http://www.bbc.co.uk/news/10298342 (last accessed 16 June 2012).
49 UNCLOS, supra note 36 Article 74 3, 83 3.
14
provides that States must enter into a provisional agreement called a JDA. This
solution does not address the issue of who owns the disputed territory. Instead, it
addresses the issue of how to share the resources inside the disputed area.
Consequently, States need not to wait a long time before they can become capable of
utilizing the resources in the disputed area.
A legal problem, therefore, presents itself: is there a duty to conclude an
agreement allowing the disputing States to appropriate the resources in the disputed
area without tackling the issue of ownership? In short, is there a duty to conclude a
JDA?
An international duty can only exist when there is a law requiring it. In the
absence of a international law, States cannot be compelled to enter into a JDA. Among
the sources of international law applied by the ICJ, custom and conventions may
support this duty. The proponent will extensively explore the presence or absence of a
Customary International Law or Custom requiring the conclusion of a JDA. If there is
a custom, then the Philippines and China can be said to have violated this duty.
Consequently, neither parties can ask for a remedy under the principle of pari delicto.
The proponent will focus more on the existence of a custom since the
proponents extensive review of the treaties, general principles of law, and subsidiary
sources of International law does not support the existence of an international duty to
conclude a JDA.
As regards the issue of the existence of a custom, two writers had taken the
opposite sides of the issue Onorato and Ong. Onorato affirms that there is a custom
15
compelling States to conclude a JDA. The position is primarily based on the growing
practice of States, as evinced by the increasing number of bilateral treaties that were
entered into during the 1970s. Bolstered by actions made by the North Sea States,
Onorato believes that the obligation to negotiate a sharing agreement had evolved and
became an obligation to conclude sharing agreements.50
Ong, on the other hand, opposes this theory of Onorato and mainly attacked the
latters position by proving the absence of an opinio juris, which is a primary
component of an international custom. No matter how prevalent the practice is, custom
cannot exist if there is no opinio juris.
Reliance on the debate of both writers is not sufficient when both allegations are
credible on its face. In an attempt to put the opinions of two writers in the same plane,
resort to the opinion of the Committee on Formation of Customary (General)
International Law is warranted. The said Committee formulated a set of rules that
encompassed the standpoints of both Onorato and Ong. Using these rules, the debate
may be put to an end. Without any intention of revealing the answer at the outset, the
resolution of the debate is only limited to three possible outcomes. First, there is no
custom. Second, there is a custom. Lastly, it still depends on the nature of the
circumstances.
How is good faith exercised by States
in concluding JDAs?
50 Chapter III.
16
One must distinguish the duty to conclude a JDA and the duty to negotiate in good faith
a JDA. In the former duty, a JDA must be formed by the parties, while the latter, a JDA
may or may not be formed.
On the issue of whether there is a duty to negotiate a JDA, the answer is clear.
The UNCLOS provides that there is a duty to negotiate in good faith. The duty can be
found in Articles 74 and 83 of the said treaty. However, the language employed by the
treaty shall make every effort produces a void in the law. A law without standards
is no law at all. Because of the language, the obligation appears to be akin to a
directive or a policy that is not binding. Yet, basic to statutory construction is to adopt
the interpretation that would give effect to the law rather than to destroy it. More
importantly, the ICJ has already recognized the obligation in two of its decisions one
in the North Sea Continental Shelf cases and the other is in the Delimitation of the
Maritime Boundary in the Gulf of Maine Area case.51
Indeed, there is an obligation but the lack of clarity as to its proper interpretation
prevents its enforcement.
Good faith as a standard for negotiation has found its
meaning in the domestic courts decision and works of experts in negotiation. Although
States and the international courts are the usual interpreters of treaties, the interpretation
of domestic courts and experts in are also under the Vienna Convention on the Law of
Treaties.
Whether or not a State can be compelled
to enter into a JDA when the circumstances
51 Chapter IV.
17
reveal that cooperation is possible
Every thesis ends with a legal proposition. This study proposes and believes
that in a supposed absence of a custom requiring the conclusion of a JDA, the good
faith aspect required in every negotiation can compel States to enter into a JDA.
C. OBJECTIVES OF THE STUDY
This study takes a legal approach of determining the nature, legality, and effects
of a JDA. Its main objective is to determine whether it is compulsory for States to enter
into a JDA if the individual legal frameworks of China and the Philippines favor its
creation.
In practical terms, this study aims to provide the Philippine Government a
sufficient arsenal of arguments that it can offer to China during diplomatic talks. In a
territorial dispute, States will hold on tightly to their position. The parties will close
their ears to the position of the other. In order to rebut any refusal to negotiate, a strong
legal basis to compel States to negotiate is necessary.
The task, therefore, is to show that a refusal to enter into a JDA is an act done in
bad faith. Under international law, domestic laws cannot be used as reasons for refusal
to comply with the obligation. This study aims to create a legal framework where the
interplay of the two laws is possible without substantial harm on the part of the States.
In the end, the domestic laws of both States can be fitted together to form a joint
regime. Consequently, a peaceful co-existence of both States can be achieved. The
desire of both States for a large domestic supply of oil will not result into an armed
conflict between States.
18
D. METHODOLOGY
This study first explains the definition of a JDA and the essential circumstances
that will lead to its application. It intends to define a JDA using opinions of the leading
authors in this field like Masahiro Miyoshi, David Ong and Yusuf Mohammad Yusuf.
The proponent will also define a JDA using the general elements of a contract parties,
consideration and subject matter. To further the understanding of what is a JDA, the
types of JDAs, as explained by the experts in the field, shall also be discussed. The
materials that will be used in this chapter shall be the international conventions,
journals, concluded JDAs, ICJ and Permanent Court of Arbitration (PCA) decisions,
and writings of experts in the field.
The Proponent would like to stress that this study intends to discuss two duties
of States under international law the duty to conclude a JDA and the duty to negotiate
a JDA. In Chapter III, the duty to conclude a JDA shall be discussed. In order for a
duty under international law to exist, there must be a law requiring it. The Statute of
the International Court of Justice (ICJ) enumerates the sources of international law.
This Study shall primarily discuss the issue of whether there is a custom requiring
States to conclude a JDA. In contrast, the other sources shall be discussed briefly. In
the process, this study shall be using the following materials: the UNCLOS, UN official
documents like the GA Resolution and UNEP Guidelines, writings of most highly
qualified publicists, PCIJ and ICJ decisions, the leading materials in JDA written by
William Onorato and David Ong, the Final Report of the London Conference, journals,
19
bilateral delimitation treaties, past JDAs concluded, and data from the CIA World
Factbook.
In Chapter IV, the duty to negotiate a JDA shall be discussed. The emphasis in
this Chapter is defining the good faith requirement in negotiations. To determine what
is the definition of good faith in negotiations, this chapter will resort to VCLT provision
on interpretation of treaties, PCIJ and ICJ decisions defining good faith in negotiations,
U.S. and Philippine Courts decision as regards bargaining in good faith and, expert
opinions of negotiation analysts.
Chapter V is a continuation of Chapter IV but its focus shifts to applying the
definition derived in Chapter IV. In the early part of this chapter, journals of experts in
Chinese Nationalism and general information about how oil fuels economic growth in
the present situation shall be used to show the significance of a concluded JDA. In the
later part of Chapter V, a reasonable and legal offer shall be made. To make the offer to
China acceptable, the relevant Chinese laws must be reviewed. Consequently, in later
part of this chapter, various Chinese laws in mining and the relevant Philippine law in
mining shall be used. To make sure that the relevant Philippine law is constitutional,
the note of Tecson, Villareal and Migallos shall be used.
E. SIGNIFICANCE OF THE STUDY
As the world oil supply continue to decrease, oil prices continue to increase. If
the supply increases, the price of oil will decrease. The oil locked inside the WPS can
supply the local demand for oil and can even create a surplus for exportation. 52 The
52 Reuters, supra note 23.
20
WPS is reported to contain 28 billion to 213 billion barrels of oil. 53 The Philippines
consumes 310,000 barrels of oil per day, with an oil domestic production of only 33,110
barrels per day.54
However, no State may take advantage of the petroleum resources without a
final or provisional delimitation agreement.
A JDA is a form of a provisional
delimitation agreement.55
This study proposes that there is an obligation for both China and the
Philippines to enter into a JDA. It will be explained later in this study that the duty to
conclude arises from the UNCLOS and not from customary international law. If both
States enter into a JDA, they will be able to immediately reduce the amount of oil they
are importing.
Aside from the economic benefits that will result from a concluded JDA, the
said agreement can also maintain the peaceful co-existence between China and the
Philippines. Peaceful co-existence may only be achieved if the States agree to refrain
53 Id.
54
Central Intelligence Agency, East & Southeast Asia: Philippines, available at

https://www.cia.gov/library/publications/the-world-factbook/geos/rp.html (last accessed 24 June 2012).
55 Yusuf, infra note 85.
21
from using force and intimidation. Having a JDA that embodies this intention in
written form is a step towards achieving this goal.
F. SCOPE AND LIMITATIONS
This study is limited to a JDA with China only
A possible Joint Development Agreement (JDA) between the Philippines and China
will be the one that will be discussed in this study. The primary reason for this
limitation is a JDA with China is the most significant issue at the present because of the
aggressive stance China has over its claims. Chinas aggression poses as a threat to its
peaceful co-existence with the Philippines.
A limited scope will better show the
function of a JDA as an instrument of peace and economic betterment.

This study will not discuss the
constitutionality of the Rules
governing a JDA
A JDA is basically a provisional sharing agreement between States that is
mandated by UNCLOS to be negotiated in good faith. 56 The sharing agreement has for
its subject matter the natural resources, which includes oil and natural gas, within the
maritime area where the EEZs overlap. 57 To determine whether oil and natural gas
exist, an oil and natural gas exploration must first be commenced.58
If it was
56 See Chapter II (B) and IV (A).
57 Id.
58 GOVERNMENT DU QUEBEC, STRATEGIC ENVIRONMENTAL ASSESSMENT OF OIL AND NATURAL GAS

EXPLORATION
(SEA2) 20.
AND
DEVELOPMENT
IN THE
ANTICOSTI, MADELEINE
AND
BAIE
DE
CHALEURS BASINS
22
determined after exploration that oil and natural gas do exist, exploitation or mining
will be done.59
However, before exploration of the natural resources can commence, States must first
determine the limits of their territory within the overlapping EEZ. If not, then they will
be violating Article 74, paragraph 3 of the UN Convention on the Law of the Seas
(UNCLOS).60 This can be done through agreement or through a decision of a thirdparty court.61
States do not need to wait for the conclusion of a final delimitation agreement or
for the decision of a court. States may enter into provisional agreements.62 These
provisional agreements govern the sharing of resources, until a final delimitation is
59 Id., 23.
60 UNCLOS, supra note 36, Art. 74 3; see Chapter V (C) for discussion.
61 Id.
62 Id.
23
made.63 They may also govern the relations of the parties and set rules that the parties
must follow while the issue of ownership is being determined.64
However, a preliminary issue must be resolved first. Are the States allowed by
their national laws to enter into a provisional agreement like a JDA? To answer this
issue, the proponent partly relied on the study of other authors
Atty. Ma. Christina Tecson had already discussed the constitutionality of
Presidential Decree 87 (P.D. No. 87), which is the governing law on oil exploration
and exploitation. She concluded that oil exploration and exploitation with foreign
corporations are constitutional as long as that the constitutional safeguards under the
1987 Constitution are added with the requirements under P.D. No. 87.65
This study will include a discussion of the provisions under P.D. No. 87.
However, the purpose is not to prove their constitutionality. The discussion is meant to
determine whether there are irreconcilable provisions between the Chinese Mining
Legal Framework and that of the Philippines. A chapter of this study is devoted to a
63 See Chapter II (C) (2).
64 See Nigeria JDA, infra note 265, Footnote 85.
65 Ma. Christina E. Tecson, Exploring Exploration: Fitting the Joint Marine Seismic Undertaking and
Oil Exploration Laws into the Mold of Section 2, Article XII of the 1987 Constitution, 55 ATENEO L.J.
149, 172-181, 207-208 (2010).
24
discussion on whether the Service Contract Regime of the Philippines and the
Concession Regime of China can operate together.66
This study is limited to a possible JDA over
the petroleum resources in the Delta Sea
The UNCLOS made it mandatory for States to negotiate for a provisional
agreement like a JDA when an overlapping EEZ or continental shelf exists. 67 If there
are no overlapping territories, States are not mandated to negotiate.68
There are several overlapping EEZs between the Philippines and the other
Southeast Asian Nations, this study will only discuss a possible JDA over the petroleum
resources in the overlapping EEZ between China and the Philippines. Micah Saturday
Alciso, author of the Juris Doctor Thesis entitled The Delta Sea, illustrated in detail the
overlapping EEZ between China and the Philippines and coined it as the The Delta
Sea. This study shall no longer go through the same tedious and hardworking process
as Mr. Alciso did. The credibility of the work of Mr. Alciso is obvious from the fact
that professors and lecturers have used his work.
66 See Chapter V.
67 UNCLOS, supra note 36, Art. 74 3; see Chapter IV for the discussion on the obligation to
negotiate.
68 Id.; To negotiate is not synonymous with to conclude. See Chapter III for the discussion on the
existence of an international obligation to conclude a JDA.
25
This study, however, shall adopt the details of the end product of his work an
illustration of where and how big is the overlap of the EEZs. 69 This proves the theory
of the proponent that there is so much in that area that the Philippines would not want
to neglect. Greater focus has been consistently given in the Scarborough and Spratly
islands area when an equally important territory exist in the northwestern area of the
Philippines, almost west of the Batanes island.
This study shall not discuss the modes of
dispute resolution under the Article 74, paragraph 1
and Part XV of the UNCLOS
A JDA is neither a mode of negotiation nor a mode of dispute resolution. Its legal basis
is Article 74, paragraph 3 of the UNCLOS, which provides that States must make
every effort to enter into a provisional agreements of a practical nature pending the
conclusion of a final agreement. Authors incorporate a dispute-resolving aspect to it
because it prevents the escalation of the dispute and returns the relations back to status
quo ante.70 However, it is improper to treat it as a mode of dispute settlement.
69 Micah Saturday Alciso, The Delta Sea: Resolving the Overlapping 200 Nautical Mile Exclusive
Economic Zones of the Republic of the Philippines and the Peoples Republic of China in the West
Philippine Sea in Light of the UNCLOS and Republic Act 9522, at Annex 10 (2012) (unpublished J.D.
thesis, Ateneo de Manila University) (on file with the Professional Schools Library, Ateneo de Manila
University).
70 Nguyen Hong Thao, supra note 37, at 79.
26
A JDA is an agreement regarding the exploration and exploitation of petroleum
resources. However, it does not touch upon the issue of ownership. The overlap
remains to be disputed until a final delimitation is created.71
This study shall not discuss the proper final delimitation of the overlapping EEZ
in light of the non-conclusive nature of the nine dotted lines how the boundaries have
to be divided and the extent of each others territory.
To reiterate, a JDA is not a final delimitation agreement. It is a provisional
agreement resorted to by States until a final agreement is created. Although putting
States in status quo ante is not its main purpose, States entering into a JDA agree to
suspend the issue on ownership and focus more on sustaining the need of States for a
stable supply of resources, especially oil.
This study will do a critique of the differing
opinions as to the existence of a custom
of the experts in JDA.
One of the issues that this study seeks to resolve is the presence or absence of a
customary international law requiring the conclusion of a JDA. If it is determined that
there is a custom, then the discussion of the true legal definition of the phrase make
every effort to enter into provisional arrangements of a practical nature is not
necessary. If a custom exists, States are not only required to exert every effort. They
are mandated to conclude.
71 UNCLOS, supra note 36, arts. 74 3, 83 3.
27
To determine the presence or absence of a custom, the proponent looked into the
publications of the two most highly qualified publicists in this field William Onorato
and David Ong. William Onorato proposed that there is a custom requiring States to
enter into an agreement that has for its subject matter the utilization of the resources in
a disputed area.72 David Ong opposed this proposition by arguing that there is no
opinio juris to the proposed practice.
This study will discuss the salient points of their arguments and will provide an analysis
of their arguments using the rules formulated by the Committee on the Formation of
Customary International Law (Committee).
It shall be shown that both experts
coincide and operate jointly in the same plane when both arguments are viewed using
the rules provided by the Committee. Under such rules, it shall be determined who has
a better opinion.73
This study will discuss how the duty to negotiate
is complied.
This study differentiated the duty to conclude a JDA and the duty to negotiate a
JDA. The duty to negotiate is found in the UNCLOS itself, which states that States
shall make every effort to enter into provisional arrangements of a practical nature.
72 Onorato, supra note 38.
73 See Chapter III.
28
The duty to conclude a JDA is independent from the duty of to negotiate a
provisional agreement. The obligation has been reiterated in at least two decisions of
the ICJ, namely the North Sea Continental Shelf cases and the Gulf of Maine case.
G. ORGANIZATION OF THE THESIS
Chapter 2 shall discuss the presence of overlapping EEZs between China and
the Philippines. In this chapter, the legal bases used in determining the EEZs of both
States shall be discussed. It shall be revealed that the overlap of the two EEZs produces
an area too significant to be neglected.
Chapter 3 shall discuss JDA as an emerging concept in international law. The
discussion under this chapter shall be two-pronged: first, the JDA as an agreement shall
be discussed; second, the JDA as capable of resolving a dispute shall be discussed.
Chapter 4 shall discuss the duty of States to negotiate in good faith. The chapter
will first discuss that the duty is recognized by the ICJ in its two decisions namely, the
North Sea Continental Shelf cases and the Gulf of Maine case. Then, it will proceed on
discussing the how the void in the law is to be resolved using the modes authorized by
the VCLT. The chapter will be concluded by a discussion on Negotiation Analysis
Approach, which basically states that the duty to negotiate involves an evaluation of
what can and cannot be compromised.
Chapter 5 is a continuation of Chapter 4. It will mainly focus on applying the
Negotiation Analysis Approach to the WPS dispute. Through the process of evaluation,
the benefit of a status quo and of having a cooperative agreement shall be discussed. It
will be revealed that a cooperative agreement will mutually benefit both States.
29
However, every agreement starts with an offer so, in this chapter, a reasonable and legal
offer of the Philippines shall be explored. The offer must conform not only to the legal
mining framework of the Philippines.
It must also conform to the legal mining
framework of China to make the offer acceptable. In order make the offer acceptable to
both States, an evaluation of the legal frameworks shall be done. In the end, it shall be
argued that both legal frameworks can operate within the same environment; that, the
normal profits of both governments are not diminished and; that, the financial burden is
primarily with the Contractor but this burden is not unbearable considering the profits a
Contractor makes in its business. In order to reinforce the previous position, this study
will look at the possible compromises, which the parties may have to agree, in order to
remove some impediments to a possible cooperation.
Chapter 6 shall be the Conclusion and Recommendation. In this part, the entire
study shall be explained, the purpose and relevance of every part of the thesis, and how
each part contributes to the legal proposition, which, broadly stated, is whether or not,
in the conflict between the Philippines and China, the duty to negotiate a JDA is also a
duty to conclude.
II.
JDA AS AN EMERGING CONCEPT IN INTERNATIONAL LAW

A. THE PHILIPPINES AND CHINA ARE BOUND TO COMPLY WITH
THE UNCLOS
1. The Philippines Signed and Ratified the UNCLOS
Under Article 11 of the Vienna Convention on the Law of Treaties (VCLT),
[t]he consent of a State to be bound by a treaty may be expressed by signature,
30
exchange of instruments constituting a treaty, ratification, acceptance, approval or
accession, or by any other means if so agreed. 74 Article 24, paragraph 3 of the VCLT
further provides that [w]hen the consent of a State to be bound by a treaty is
established on a date after the treaty has come into force, the treaty enters into force for
that State on that date, unless the treaty otherwise provides. 75 More importantly, the
Article 26 of the VCLT restated the general principle of pacta sunt servanda, which
states that [e]very treaty in force is binding upon the parties to it and must be
performed by them in good faith.76
The Philippines agreed to be bound by the UNCLOS and the provisions of the
said convention also became part of the laws of the Philippines upon concurrence of the
Senate. Section 21, Article VII of the 1987 Constitution provides that two-thirds of the
Senate must concur to give effect to the treaty before such treaty enters into force. 77
The Philippines signed the treaty on 10 December 1982 and the Senate concurred to
make it effective in 8 May 1984. 78 Therefore, the Philippine is bound to comply with
the provisions of the UNCLOS in the international and in the domestic sense.
74 Vienna Convention on the Law of Treaties art. 11 May 23, 1969, 1155 U.N.T.S. 331 [hereinafter
VCLT].
75 Id., at Art. 24 3.
76 Id., at Art. 26.
77 PHIL. CONST. ART. VII, 21.
31
2. China Signed and Ratified the UNCLOS
China also ratified the UNCLOS on 7 June 1996. 79
However, it made a
declaration 10 years after or on 25 August 2006, which states that [t]he Government of
the People's Republic of China does not accept any of the procedures provided for in
Section 2 of Part XV of the Convention with respect to all the categories of disputes
referred to in paragraph 1 (a) (b) and (c) of Article 298 of the Convention.80
B. ARTICLES 74 (3) APPLIES WHEN THERE IS AN OVERLAPPING
EEZ
1. Overlapping EEZ
The Declaration of the Government of the Peoples Republic of China (PRC)
and the Law of the PRC on the Territorial Sea and the Contiguous Zone law are the
legal bases for Chinas EEZ.81 Republic Act 9522, on the other hand, is the basis for
78 Division for Ocean Affairs and the Law of the Sea, Declarations and statements, available at
http://www.un.org/Depts/los/convention_agreements/convention_declarations.htm#Philippines
Understanding made upon signature (10 December 1982) and confirmed upon ratification (last accessed
12 June 2012).
79 Division for Ocean Affairs and the Law of the Sea, Declarations and statements, available at
http://www.un.org/Depts/los/convention_agreements/convention_declarations.htm#China
ratification (last accessed 12 June 2012).
80 Id.
81 Alciso, supra note 69, p.59.
Upon
32
determining the EEZ of the Philippines.82 Plotting the coordinates provided by both the
Chinese Laws and Philippine law and extending them to 200 nautical miles will reveal
the overlapping EEZ, the size of which is almost the same as the terrestrial territory of
Taiwan.83
2. Void in the Law
Articles 74.3 and 83.3 of the UNCLOS provides that:
Pending agreement as provided for in paragraph 1, the States concerned, in
a spirit of understanding and cooperation, shall 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. Such arrangements shall be without prejudice to the final
delimitation.84
There are some parts of the provision that are definite and categorical. First,
there is no delimitation yet of the overlapping clams. And second, the phrase such
arrangements refers to agreements that are provisional or still subject to the final
agreement of the parties. This also implies that Article 74 are speaking of two different
agreements that disputing States must agree to enter into. First is the delimitation or
final agreement. And the second one is the provisional agreement.
More importantly, there is a void in the law. The provision did not define what
specifically the provisional arrangements of a practical nature is. Moreover, the
82 Id., p.11.
83 Id., Annex 10.
84 UNCLOS, supra note 36, arts. 74 3, 83 3.
33
phrase shall make every effort to enter produces a void in the law. It does not say
whether or not there is a duty to conclude a provisional arrangement.
3. JDA as a Provisional Arrangement of a Practical Nature
Yusuf opines that the creation of a joint development zone, pending boundary
delimitation, in order to develop offshore petroleum resources certainly qualifies as an
example of a provisional agreement.85 The opinion of Yusuf was supported by the
decision of the Guyana Suriname Arbitration, which favored a joint development
between the disputing States.86 It was also supported by the ICJ which ruled that
disputing States may either equally or proportionately divide the disputed area or they
may decide on a regime of joint jurisdiction, user, or exploitation for the zones of
overlap or any part of them (Emphasis omitted).87
85 Yusuf Mohammad Yusuf, Is joint development a panacea for maritime boundary disputes and for the
exploitation of offshore transboundary petroleum deposits?, I.E.L.R. 2009, 4, 130-137,
[hereinafter Yusuf].
AT
135
86 Id., at 136; citing Guyana-Suriname Arbitration (Guyana/Suriname), Hague Ct. Rep. 153 462
(Perm. Ct. Arb. 2007), available at http://www.pca-cpa.org/showfile.asp?fil_id=664 (last access 18 June
2012).
87 Id. at 135; citing North Sea Continental Shelf cases (Federal Republic of Germany/Denmark; Federal
Republic of Germany/Netherlands), 1969 I.C.J. Rep. 3, at p.53, 101(C)(2), available at
<http://www.icj-cij.org/docket/files/52/5561.pdf>, (last accessed 18 June 2012).
34
C. Definition of a JDA
Joint Development Agreements (JDA) are agreements, concluded by States,
allowing States to explore and exploit the resources in the disputed area, containing
stipulations governing the exploration and exploitation within the disputed area.
1. Parties to the JDA
Only States can enter into a joint development agreement. 88 The general rule is
only States have international legal personality.89 However, according to Malcolm
Shaw, non-State entities can also gain legal personality because:
International personality is participation plus some form of community
acceptance. The latter element will be dependent upon many factors,
including the type of personality under question. It may be manifested in
many forms and may in certain cases be inferred from practice. It will also
reflect a need. Particular branches of international law her are playing a
crucial role. Human rights law, the law relating to armed conflicts and
international economic law are especially important in generating and
reflecting increased participation and personality in international law.90
Hence, when the community afforded non-State entities with legal personality through
the subsequent enactments of international laws, they acquire the capacity of a State.91
88 UNCLOS, supra note 36, Art. 743, 833.
89 MALCOLM SHAW. INTERNATIONAL LAW. 196 (6th ed. 2008).
90 Id. at 197.
91 Id.
35
However, the wording of Articles 74.3 and 83.3 is specific. 92 It used the word
State as the entity that has the capacity to enter into provisional agreements, which
include joint development agreements. According to the Montevideo Convention,
[t]he state as a person under international law should possess the following
qualifications: a ) a permanent population; b ) a defined territory; c ) government; and
d) capacity to enter into relations with other states. 93 The meaning accorded cannot be
similar with non-State entities such as individuals or corporations. Therefore, only
States remain to be entitled to enter into a JDA.
2. JDA allows Exploration and Exploitation Pending Delimitation
JDA was defined in different ways by different authors. Yusuf defines it as a
legal arrangement that allows to or more coastal neighbours to conduct the joint
exploration and production of petroleum resources situated in areas of overlapping
claims.94
David Ong defines joint development as a generic term given to
international agreements between states whose main function is to provide for the cooperative exploitation of hydrocarbon resources that come under the jurisdiction of two
92 UNCLOS, supra note 36, Art. 743, 833.
93 Montevideo Convention on the Rights and Duties of States, Article 1 Dec. 26, 1933 (entered into
force Dec. 26, 1934).
94 Yusuf, supra note 85, 131.
36
states.95
Lastly, Miyoshi defines it as an inter-governmental arrangement of a
provisional nature, designed for functional purposes of joint exploration and for and/or
exploitation of hydrocarbon resources of the sea-bed beyond the territorial seas.96
Basic to the definitions provided above is the fact that States enter into a JDA to
allow them to explore and exploit the hydrocarbon or oil resources within overlapping
territories. But Miyoshis definition is unique in a sense that he described a JDA as
provisional. Indeed, a JDA does not determine the issue of ownership over the disputed
territory.97 As discussed above, a JDA is a separate agreement entered into by disputing
States while the dispute is being resolved.98 Although the territorial boundaries are not
yet determined with finality, Article 74, paragraph 3 of the UNCLOS allows States to
enter into provisional agreements of a practical nature. 99 As discussed in Chapter II
(B), these agreements include JDAs. Therefore, by synthesizing the definitions of the
95 Id.; citing DAVID M. ONG. THE PROGRESSIVE INTEGRATION
OF ENVIRONMENTAL
PROTECTION
WITHIN OFFSHORE JOINT DEVELOPMENT AGREEMENTS, in EXPLOITATION OF NATURAL RESOURCES IN THE

21ST CENTURY 116 (M. Fitzmaurice and M. Szuniewicz, eds., 2003).
96 Id., at 132; citing Masahiro Miyoshi, The Joint Development of Offshore Oil and Gas in Relation to
Maritime Boundary Delimitation, 2(5) MARITIME BRIEFING 1, at 3.
97 Elliot L. Richardson, Jan Mayen in Perspective, 82 AM. J. INTL L 443, 449 (1988).
98 Chapter II (B) (3).
99 UNCLOS, supra note 36, Art. 733.
37
three known authors in the field of JDA with the provisions of the UNCLOS, a JDA can
be defined as an agreement the consideration for which is the capacity to explore and
exploit the hydrocarbon resources even if there is no final determination yet as to the
limits of each of the States territory.
D. Types of Joint Development
Although there are a number of JDAs that have been concluded by States, it is
highly unlikely that two distinct JDAs will be the same. 100 Stipulations are dependent
on the political and socioeconomic climate of the State. 101 Since every State has
different political and economic conditions from other States, then, it is highly unlikely
that two JDAs are the same.
1. Single Model
In a Single Joint Development Model, only one of the States oversees the
operation.102 The other States participation is limited to the profit sharing. 103 An
100 Yusuf, supra note 85, 134; citing Joint Development of Offshore Oil and Gas, 1 Brit. Inst. of Intl.
Comp. L. 115 (Fox et. al. eds, 1989).
101 Id.
102 PETER CAMERON
AND RICHARD NOWINSKI. JOINT DEVELOPMENT AGREEMENTS: LEGAL

STRUCTURE AND KEY ISSUES [hereinafter Cameron & Nowinski]
103 Id.
38
example of this type of Joint Development is the Saudi Arabia/Bahrain Agreement in
1958.104
In the Saudi Arabia/Bahrain Agreement, both States agreed to jointly develop an area in
the Arabian Gulf.105 Saudi Arabia and Bahrain are located opposite to each other,
approximately 95 to 135 miles apart. 106 Both States agreed that they would equally
divide the disputed area.107 Moreover, they both agreed that the sovereignty of Saudi
Arabia over that area would not be affected even though the joint development zone
covers such area.108
104 Id.
105 Miyoshi, supra note 96, p. 27.
106 Richard Young, Equitable Solutions for Offshore Boundaries: The 1968 Saudi-Arabia-Iran
Agreement, 64 AM. J. INTL L. 152, 152 (1970).
107 Miyoshi, supra note 96, p.28.
108 Id.
39
2. Compulsory Joint Model
In a Compulsory Joint Model, operators from both States form a joint venture. 109
An example of this type is the Japan-South Korea Agreement. 110 In that agreement, the
disputed area is divided into subzones. 111
In a subzone, there are two or more
concessionaires, each licensed by the State parties.112 Then, one of the concessionaires
will be selected as the operator.113 The laws that will be applicable in the area will
depend on the nationality of the concessionaire that was chosen as the operator.114
109 DAVID M. ONG. IMPLICATIONS
OF RECENT SOUTHEAST ASIAN STATE PRACTICE

INTERNATIONAL LAW ON OFFSHORE JOINT DEVELOPMENT .
FOR THE
110 Id.
111 Ana E. Bastida, et. al, Cross-Border Unitization and Joint Development Agreements: An
International Law Perspective, 29 Hous. J. Intl. L. 355, 399 (2007).
112 Id.
113 Id.
114 Id.
40
With regard to sharing of revenues and expenses, the agreement states that the
concessionaires will share them equally.115 The revenues of the State will be in the form
of taxes to which their concessionaires are liable to pay.116
3. Joint Authority Model
In a Joint Authority Type, a separate entity was established by State-parties. 117 A
recent example of an agreement that adopted this framework is the Thailand-Malaysia
Memorandum of Understanding (MOU).118 In the Thailand-Malaysia MOU, the
separate entity has been granted by both States with administrative and developmental
powers incidental or connected with the discharge of its petroleum operations
functions.119
115 Id.
116 Id.
117 CAMERON & NOWINSKI, supra note 102.
118 Id.
119 Bastida, supra note 111, 402.
41
III.
INTERNATIONAL OBLIGATION TO CONCLUDE A JDA

Article 38(1) of the Statue of the International Court of Justice (ICJ)
enumerates the following sources of law, which would also constitute the States
sources of obligation:
a
b
c
d
International conventions, whether general or particular,

establishing rules expressly recognized by the contesting states;
International custom, as evidence of a general practice accepted as
law;
The general principles of law recognized by civilized nations;
Subject to the provisions of Article 59, judicial decisions and the
teachings of the most highly qualified publicists of the various
nations, as subsidiary means for the determination of rules of law.120
The existence of international conventions and general principles of law shall

not be substantially discussed. No convention requires States to conclude a JDA. The
existing and relevant convention the UNCLOS expressly states that the duty is only
to negotiate and not to conclude.121 Article 74, paragraph 3 uses the words shall make
every effort implying that the conclusion of a JDA remains to be voluntary on the part
of the States.122
There can also be no general principle of international law supporting the duty
to conclude a JDA. Bin Cheng provided a two-pronged test. The rule must, first, be
120 United Nations, Statute of the International Court of Justice, Article 38 1, available at
http://www.unhcr.org/refworld/docid/3deb4b9c0.html (last accessed 24 June 2012) [hereinafter Statute
of the ICJ]
121 UNCLOS, supra note 36, art. 74 3.
122 Id.
42
considered a principle that expresses a general truth, which guides our action, serves
as a theoretical basis for the various acts of our life. 123 Second, it must be recognized
by civilised nations.124 Bin Cheng succinctly discussed at what point in time can a
principle be considered as a source of international law:
Lord Phillimore also explained that the principles referred to in Article
38 I (c) were those which were accepted by all nations in foro
domestico. M. de La Pradelle took them to mean that general
principles of law were the basis of the municipal law of all or nearly
all States. The recognition of these principles in the municipal law of
civilized peoples, where the conception of law is already highly
developed, gives the necessary confirmation and evidence of the
juridical character of the principle concerned. The qualification
recognized by civilised nations was intended to safeguard against
subjectivity and possible arbitrariness on the part of the judge. 125
(Underscoring supplied)
In other words, the rule that States must conclude a JDA must first be
considered a principle. The second test is that this principle must be able to reach the
level wherein it can be considered as embedded in the domestic laws of civilized
nations. Since none of the tests were complied with, there can be no general principle
of law requiring States to enter into a JDA. Therefore, what is left to discuss is the
existence or non-existence of custom, which can either be general or universal and
regional.
123 BIN CHENG, GENERAL PRINCIPLES

TRIBUNALS 24.
124 Id., p.24-25.
125 Id.
OF
LAW AS APPLIED
BY
INTERNATIONAL COURTS
AND
43
A. The Debate: Existence or Non-existence of a General Custom
This part of the study seeks to determine the existence or non-existence of a
custom that will mandate the conclusion of a JDA. If there is such a custom, then the
duty to negotiate a JDA provided under the UNCLOS is useless. If States must
conclude a JDA, the later part of this study, which discusses the true definition of good
faith negotiation, is not necessary. The proponent is of the position that there is no
custom requiring the conclusion of a JDA. Thus, it becomes necessary to determine the
true meaning of good faith negotiation.
1. Elementary Requirements of State Practice and Opinio Juris
The Committee on Formation of Customary (General) International Law
(Committee), composed of Professor Mendelson, as the Chairman, Professor
Mullerson, as the Rapporteur, and other most highly qualified publicists of different
countries like Dr. Villiger, Professor Bin Cheng and Professor Schroder, 126 created a set
of rules for practical guidance in determining the existence of customary international
law (custom).127
According to the Committee, the International Court of Justice in the North Sea
Continental Shelf cases gave an elaborate explanation of what is a custom:
Not only must the acts concerned amount to a settled practice, but they
must also be such, or be carried out in such a way, as to be evidence of
126 London Conference. London, U.K., July 2000, Statement of Principles Applicable to the
Formation of General Customary International Law, Final Report of the Committee, London, 2000, p. 1
127 Id., at p. 3-4.
44
a belief that this practice is rendered obligatory by the existence of a
rule requiring it. The need for such a belief, i.e. the existence of a
subjective element [emphasis added], is implicit in the very notion of
the opinio juris sive necessitatis. The States concerned must therefore
feel that they are conforming to what amounts to a legal obligation.
The frequency, or even habitual character of the acts is not in itself
enough. There are many international acts, e.g., in the field of
ceremonial and protocol, which are performed almost invariably, but
which are motivated only by considerations of courtesy, convenience
or tradition, and not by any sense of legal duty.128 (Emphasis omitted)
This has also been the position of members of the Committee. 129 That is, a custom has
two elements State practice and opinio juris sive necessitates (opinio juris).130
Similarly, the Statute of the ICJ breaks down custom into general practice and the
element that it is accepted as a law.131 These elements have been thoroughly discussed
by the Committee in Parts II an III of their final report, which shall be re-discussed in
this study.
Also, opinion of Malcolm Shaw will be inserted to supplement the
Committees opinion.
In this part of the study, Part III (A), the sub-elements of State Practice and Opinio Juris
is defined. In Part III (B), regional custom shall be explained. Lastly, in Part III (C) of
this study, the issue of whether there is State Practice and Opinio Juris or not shall be
answered, including whether a regional custom exists in Southeast Asian region.
128 Id. at p. 6; citing North Sea Continental Shelf cases, 1969 I.C.J. Rep. at p.44, 77.
129 London Conference, supra note 126, at p. 7.
130 Id.
131 Statute of the ICJ, supra note 120, art. 38 1.
45
2. The Elements of State Practice
The Committees discussion of what is State practice can be broken down into
three parts. They first discussed the acts contributive to the creation of a State practice.
Then, they discussed who or what must be the actor of the practice. Lastly, they
discussed the density of the practice.
a. Acts Contributive to State Practice
The act of a State may either be physical or verbal. 132
Physical acts refer to
arresting people or seizing property133 and the like. On the other hand, verbal acts,
refer to the:
[d]iplomatic statements (including protests), policy statements, press
releases, official manuals (e.g. on military law), instructions to armed
forces, comments by governments on draft treaties, legislation,
decisions of national courts and executive authorities, pleadings before
international tribunals, statements in international organizations and
the resolutions these bodies adopt.134
However, the formal verbal or physical acts, which contribute to State practice, must be
further sieved from opinions of the actors, which do not contribute. 135 Not only must
133 Id.
134 Id.
135 Id., at p. 15.
46
the acts of the States be sieved, they must also be based on the influence and
contribution of the act to the evolving State practice.136
Moreover, the act must be public or disclosed to other States. 137 Shaw agrees
and posits that the factor of conspicuousness emphasizes . . . the more significant
elements of the overt act which affirms the existence of a custom. 138 Disclosure, as
defined by the Committee, is tantamount to an announcement to other States.139 What
the Committee argues as non-constitutive of a custom is an internal communication
within the State alone.140 Consequently, at least two States must know about the act to
make such act public and constitutive of State practice.141
The last type of act that contributes to the creation of State practice includes
those considered as omissions.142 The Committee disagrees with the decision of the ICJ
136 SHAW, supra note 89, p.80.
139 London Conference, supra note 120, p.15..
140 Id.
141 Id.
47
in the Lotus case. It treats the abstention of States as omissions constitutive of a State
practice when such abstention is not ambiguous.143
To Shaw, omissions or [f]ailures to act are in themselves just as much evidence
of a states attitudes as are actions.144 But Shaw added, as a way of caution, that a
failure to act can arise from either a legal obligation not to act, or an incapacity or
unwillingness in the particular circumstances to act." 145 He further cautioned that the
omission must be a conscious act. The States, as actors, must be aware that they were
not acting a particular way because they were under a definite obligation not to act that
way.146
b. The Actors in Acts Constitutive of State practice
The Committee limited the acts constitutive of State practice to those performed
by the executive, legislative and judicial organs of the State, and those performed by
142 Id.
143 Id.; citing the Case of the S.S. Lotus, PCIJ, Ser. A, No. 10, 4, p. 28 (Sept. 1927) (for only if
such abstention were based on their being conscious of having a duty to abstain would it be possible to
speak of an international custom)
144 SHAW, supra note 89, p.80-81.
145 Id.
146 Id., citing S.S. Lotus, 1927 PCIJ p. 28.
48
intergovernmental organizations.147 On the other hand, those performed by individuals,
corporations, and territorial governmental entities do not contribute to State practice,
unless ratified by the State.148
Last but not the least, acts of international courts and tribunals also do not
contribute to State practice.149
In contrast, acts of the international organizations
accorded with international personality, like the United Nations (UN), contribute to
State practice.150 According to Shaw, the latters acts through its resolutions evince
State practice.151
c. Uniform, Extensive, Representative, and has been Practiced
for a Considerable Length of Time
Aside from the issue of selecting a State practice, there is also the issue of
whether the practice is uniform, extensive and representative, and whether States are
following the practice for a considerable period of time.
147 London Conference, supra note 120, 16-19.
148 Id., at p. 16-17
149 Id., at p. 18-19
151 Id.; See Legal Consequences of the Construction of the Wall in the Occupied Palestinian Territory,
Advisory Opinion, I.C.J. Reports 2004, p. 136, 171 86.
49
i. Uniformity
Uniformity of the practice is generally described as consistency.152 There are
two kinds of uniformity. One is internal uniformity and the other is the collective
uniformity.153
Internal uniformity is explained in the Nicaragua case as the opposite of
inconsistencies between what a State says is the law and what it does. 154 In the same
case, it was explained by the Committee that such inconsistencies would not affect the
uniformity of the practice provided the non-conforming State does not try to excuse its
non-conforming conduct by asserting that it is legally justified.155 The ICJ held that:
If a State acts in a way prima facie incompatible with a recognized
rule, but defends its conduct by appealing to exceptions or
justifications contained within the rule itself, then whether or not the
States conduct is in fact justifiable on that basis, the significance of
that attitude is to confirm rather than to weaken the rule.156
152 London Conference, supra note 120, p. 22
153 Id; citing MENDELSON, 272 COLLECTED COURSES, 211-14.
154 London Conference, supra note 120, 22; citing Case Concerning Military and Paramilitary
Activities In and Against Nicaragua (Nicar. v. U.S.) Merits, p.98, 186 (27 June 1986), available at
http://www.icj-cij.org/docket/files/70/6503.pdf (last accessed 19 June 2012).
ICJ Rep. 1986, p. 14 at p. 98.
155 London Conference, supra note 120, 22; citing Military and Paramilitary Activities, 1986 I.C.J. at
p.98, 186
156 Military and Paramilitary Activities, 1986 I.C.J. at p.98, 186.
50
Collective uniformity, on the other hand, focuses on the inconsistencies found in
the acts of the States.157 The Committee took the position that if the inconsistency is so
great, then State practice cannot be held to exist. 158 However, if the inconsistencies are
only minor departures to the consistent practice of States, there can still be
uniformity.159 The Committee cited the Asylum case to illustrate inconsistency.160
In Asylum case, the Colombian Ambassador granted an asylum in favor of M.
Victor Raul Haya de la Torre, the head of the American Peoples Revolutionary
Alliance.161 De la Torre and others was accused of a rebellion. 162 De la Torre sought
asylum in the Colombian Embassy in Lima. Heeding to the request of De la Torre, the
Colombian Ambassador requested that De la Torre be given a safe exit. Peru refused
and the case was referred to the ICJ.163
157 London Conference, supra note 120, p. 22-23.
158 Id.
159 Id.
160 Id.
161 Asylum (Colom. v. Peru), 1950 I.C.J. 266, 272-279 (Nov. 20).
162 Id.
51
In The ICJ refused the request of an asylum on the ground that Colombia failed
to prove uniformity in the practice.164 In a portion of its decision, the ICJ held:
The facts brought to the knowledge of the Court disclose so much
uncertainty and contradiction, so much fluctuation and discrepancy in
the exercise of diplomatic asylum and in official views expressed on
various occasions, there has been so much inconsistency in the rapid
succession of conventions on asylum, ratified by some States and
rejected by others, and the practice has been so much influenced by
considerations of political expediency in the various cases, that it is
not possible to discern in all this any constant and uniform usage,
accepted as law, with regard to the alleged rule of unilateral and
definitive qualification of the offence.165
ii. Extensive and Representative

Moreover, the practice must be extensive and representative. 166 According to
the Committee, the extensiveness of the practice is not simply a question of how many
States participate in the practice.167 It must be representative or considers only the
practice of States whose interests are specially affected.168
163 Id.,
164 Id.
165 London Conference, supra note 120, 23; citing Asylum, 1950 I.C.J. at 272.
166 London Conference, supra note 120, p. 25
167 Id., at p. 26.
168 Id., at p. 26; citing North Sea Continental Shelf cases, 1969 I.C.J. Rep. at p.42, 73.
52
The Committee posits the view that if all major interests (specially affected
State) are represented, it is not essential for a majority of States to have participated
if important actors do not accept the practice, it cannot mature into a rule of general
customary law.169 The Committee justified this undemocratic rule in the following
manner:
In the nature of things, who is specially affected will vary according
to circumstances. There is no rule that major powers have to
participate in a practice in order for it to become a rule of general
customary law. Given the scope of their interests, both geographically
and ratione materiae, they often will be specially affected by a
practice; and to that extent and to that extent alone, their participation
is necessary.170
Malcolm Shaw explained this undemocratic rule by stating that heavier

footprints were made by influential [S]tates of the world.171 Shaw states:
One particular analogy that has been used to illustrate the general
nature of customary law was considered by de Visscher. He likened the
growth of custom to the gradual formation of a road across vacant
land. After an initial uncertainty as to direction, the majority of users
begin to follow the same line which becomes a single path. Not long
elapses before that path is transformed into a road accepted as the only
regular way, even though it is not possible to state at which precise
moment this latter change occurs. And so it is with the formation of a
custom. De Visscher develops this idea by reflecting that just as some
make heavier footprints than others due to their greater weight, the
more influential states of the world mark the way with more vigour
and tend to become the guarantors and defenders of the way
forward.172 (Emphasis supplied)
169 London Conference, supra note 120, p.26.
170 Id.
171 SHAW, supra note 89, p.79-80.
53
Shaw posits that countries that made heavier footprints more likely led the
creation of a custom.173 United Kingdom, according to him, significantly contributed to
the Law of the Sea and the Prize law. Russia and United States, on the other hand,
contributed in the creation of a Space Law.174
iii. Duration
The last element of duration is still debatable. The ICJ in the North Sea
Continental Shelf cases, held that:
Although the passage of only a short period of time is not necessarily,
or of itself, a bar to the formation of a new rule of customary
international law on the basis of what was originally a purely
conventional rule, an indispensable requirement would be that within
the period in question, short though it might be, State practice,
including that of States whose interests are specially affected, should
have been both extensive and virtually uniform in the sense of the
provision invoked . . . . 175
However, the Committee posits as its view that lapse of time is still necessary to
a certain extent.176 It used as an example how the rule on continental shelf became
172 Id.
173 Id.
174 Id.
175 London Conference, supra note 120, p.20; citing North Sea Continental Shelf cases, I.C.J. Rep.
1969, at p. 43 74.
176 London Conference, supra note 120, pp.20-21.
54
binding, from being a unilateral practice of the United States to becoming a bilateral
practice.177 In the later years, it was codified in the UN Convention on the Law of the
Sea, to which majority of the States are members.178
3. The Element of Opinio Juris
According to Shaw, opinio juris is the belief that a [S]tate activity is legally
obligatory.179 The Committee also set out the rules in determining the existence of
opinio juris sive necessitates. This study will not discuss them in its entirety. However,
for purposes of basic understanding, the summary provided by the Committee is
reproduced below:
If it can be shown that States generally believe that a pattern of
conduct fulfilling the conditions set out in Part II is permitted or (as
the case may be) required by law, this is sufficient for it to be law; but
it is not necessary to prove the existence of such a belief. Indeed, it is
only in the case of a practice which has already achieved an
appropriate level of generality that such a belief is likely to exist: those
who initiate a new practice which is inconsistent with the previous law
(e.g. the assertion of rights to an exclusive economic zone) cannot
realistically be said to have a belief in its legality. See Section 16. This
is not to say, however, that opinio juris has no part to play whatsoever.
For even where there is a settled pattern of behaviour which at first
sight satisfies the conditions set out in Part II, there may be
circumstances which disqualify the practice concerned (or some parts
of it) from counting towards the formation of a rule of customary law.
This is because those concerned assume, assert or take the position
that the conduct concerned does not count, has no precedential value.
This is dealt with in Section 17. The reason why this conduct does not
count is often expressed in terms of a lack of belief (a sort of opinio
177 Id.
178 Id; see generally UNCLOS, supra note 36, arts. 76-85.
55
non juris), and it will be shown that most of the judicial assertions of
the necessity of opinio juris in fact arose in that context. These are,
however, exceptional cases, and most members of the Committee
agreed that, where practice exists which satisfies the conditions set out
in Part II and is not covered by one of the exceptions discussed in
Section 17, it is not necessary to prove the existence of an opinio juris.
It may often be present, or it may be possible to infer it; but it is not a
requirement that its existence be demonstrated.180
Shaw also viewed the process of determining the existence of opinio juris as a problem.
How can one tell when a particular line of action adopted by a [S]tate reflects a legal
rule or is merely prompted, by for example, courtesy?181
According to the summary quoted above, the Committee posits the view that if
the existence of the elements of State practice is shown, proving opinio juris becomes a
matter of course.182
However, this is not to say that the latter element is of no
importance.183 Proof that the element of opinio juris exists becomes necessary if opinio
non juris is present.184
181 Shaw, supra note 89, p.73.
183 Id.
184 Id.
56
a. The Concept of Opinio Non Juris
This study will focus on the concept of opinio non juris, discussed by the
Committee in Section 17 of their report. In the later part of the study, it will be shown
that opinio non juris exists. Consequently, there can be no custom if there is no proof
of opinio juris.
The Committee believes that there are practices that contribute to the creation of
a custom and there are those that do not. 185 Section 17, paragraphs (i) to (iv) enumerate
the acts of the latter kind or those that do not contribute to the creation of a custom.
The following are the acts indicative of opinio non juris:
(1) Acts of comity;186
(2) Practice [which] would in theory be capable of giving rise to
customary rules, but for an understanding on the part of the States
as a whole that they do not in fact do so;187
(3) Practice [which] would be capable of giving rise to a customary
rule, but for a disclaimer on the part of those performing them;188
(4) Ambiguous conduct.189
185 Id., at p.34.
186 Id., at p.35.
187 London Conference, supra note 120, at p.35.
188 Id., at p.36.
189 Id., at pp.36-38.
57
According to the Committee, acts of the fourth kind can be effectively
illustrated by the decision of the ICJ in the North Sea Continental Shelf cases.190 One
of the issues in the said case is whether a custom regarding the application of the
equidistance rule exists.191
In that case, Denmark and the Netherlands proposed that
even if Article 6 of the Geneva Convention on the Continental Shelf 1958 did not
embody pre-existing customary law or crystallize an emerging equidistance rule for
delimitation, State practice had grown up since 1958 along the same lines, so that a new
rule of customary international law had come into being whose content was the same as
the conventional rule.192
The ICJ denied the proposition of Denmark and the
Netherlands. [N]o inference could justifiably be drawn that they believed themselves
to be applying a mandatory rule of customary international law.193
The Committee also believed that there is also no opinio juris in the proposed
practice.194 The Committee believes that the rest of the States who were not part of the
190 Id., at 37;
191 Id.; citing North Sea Continental Shelf cases, 1969 I.C.J. Rep. at p.23, 21.
192 London Conference, supra note 120, at p.37.
193 Id.; citing North Sea Continental Shelf cases, 1969 I.C.J. Rep. at pp.43-44, 76-77
194 London Conference, supra note 120, at pp.37-38.
58
Convention during that time view that the equidistance rule or to equal apportionment
of the resources found in a disputed area is practical and commonsensical to adopt. 195
Therefore, the ambiguity in the practice lies on the belief of the State in adopting the
equidistance rule whether they adopted it out of practicality or out of a belief that
adopting the equidistance rule is legal obligation.
b. Clearing the Ambiguity by looking at the Treaties and
Resolutions
In clearing the ambiguity described above, the Committee posited the view that
the language of the treaties and resolutions and the circumstances during their creation
can be of great help.196
Both Onorato and Ong reviewed a number of treaties and resolutions. Ong,
however, is the one who had discussed a more comprehensive review of multilateral
treaties and resolutions.197 Onorato, on the other hand, primarily rested his arguments
on the bilateral treaties.198
195 Id.
196 London Conference, supra note 120, p.43 and pp.57-59
197 Ong, supra note 39, 780-785
198 Onorato, supra note 38, 325.
59
The opinion of Onorato and Ong discusses whether the practice of entering into
a JDA is really out of a belief of a legal obligation or not. Onorato believes that the
practice is out of a belief that such is a legal obligation. Ong, on the other hand,
believes that entering into a JDA is considered to be an ambiguous conduct and in
reality, is not followed out of a belief that it is an obligation. Hence, States did not
believe that it is a legal obligation.
4. Onoratos Opinion
Onorato is the legal adviser of the Energy and Mining for the World Bank for 16
years.199
His work, the Apportionment of an International Common Petroleum
Deposit, embodies his attempt to establish a legal system governing common

petroleum deposit. His purpose is to establish a legal system for the courts, like the
ICJ, to use in resolving cases wherein two or more States share jurisdiction over the
petroleum resources.200
He believes that this attempt would be successful because
States are beginning to view that transboundary resources are co-owned by the coastal
States.201 He said that:
[a]lmost all treaties delimiting offshore international boundaries have
specifically contemplated the possibility of resultant incidental division of
offshore petroleum deposits and have approached the question of
199 Centre for Energy, Petroleum and Mineral Law, Dr. William T. Onorato, available at
http://www.dundee.ac.uk/cepmlp/staff/wtonorato.php (last accessed 15 June 2012).
200 Onorato, supra note 38, p.336
201 Id., p.325.
60
ownership of such potential deposits by accepting them as being the joint
property of the several States under which they might lie. 202 (Emphasis
supplied)
The treaties mentioned in the quote above also included a stipulation requiring
States involved to exert efforts in creating a sharing agreement. 203 The same appears in
the Anglo-Norwegian Treaty.204 It states, in part, that:
[i]f any single geological petroleum structure or petroleum field . . .
extends across the dividing line and part of such structure or field which is
situated on one side of the dividing line is exploitable, wholly or in part,
from the other side of the dividing line, the Contracting Parties in
consultation with their licensees, if any, shall seek to reach agreement as to
the manner in which the structure or field shall be most effectively
exploited and the manner in which the proceeds deriving therefrom shall
be apportioned.205 (Emphasis supplied)
Because of the above practice of States, Onorato opined that there is already an existing
customary international law requiring States to conclude a JDA. 206 Onorato posits that
when the States parties to these delimitation agreements had entered into sharing
202 Id.
203Id., p.324.
204 Id., p.326; Agreement between the Government of the United Kingdom of Great Britain and
Northern Ireland and the Government of the Kingdom of Norway relating to the Delimitation of the
Continental Shelf between the two countries, June 25, 1965, U.K. Treaty Series No. 71 (1967) Cmnd.
2757.
205 Onorato, supra note 38, p.326; citing Agreement between the Government of the United Kingdom
of Great Britain and Northern Ireland and the Government of the Kingdom of Norway.
61
agreements, a custom was created, which may compel States to conclude a sharing
agreement with their neighboring States.207
He further added that the issue of the existence of such a custom, although new
during his time, is not one which exists in a legal vacuum on the international
place.208 His proposition finds basis in other laws both domestic and international. 209
The following are the principles that supports his theory on the existence of a custom
and a general principle requiring States with overlapping claims to enter into a joint
development agreement:
(i) that a State or States interested in an international common petroleum
deposit may not unilaterally exploit such a deposit over the reasonable
objection of another such State or States, but rather that(ii) the method of exploitation along with the underlying legal basis for
apportionment of such a deposit must be the object of an agreement
between such interested States, and that, in this regard(iii) States so interested in an international common petroleum deposit are
under an obligation to enter into negotiations with a view toward arriving
at such an agreement on its apportionment between them[.]
(iv) that as regards the substance of such negotiations and the principles
and rules of law applicable to any such agreement on apportionment of a
given reserve, while it is recognized that there is no developed, crystallized
rule of international law which prescribes express methods for
apportionment of an international common petroleum deposit between
interested States, there are, nonetheless, rules and institutions of
international law and private law relevant either directly, by analogy or by
synthesis to the question under consideration, . . . .210
207 Id., p.325-326.
208 Id., p.327.
209 Id.
62
He continued his argument by elaborating more on the first principle. He argues
that States must mutually agree to allow each other to exploit the resources in the
overlapping territorial claim.211 Without such agreement, the affected States right over
the resources is impaired and the acting State is presumed guilty of an unconsented,
unilateral exploitation of ... a common petroleum deposit . . . .212
Later in this study, it will be observed that the first two principles of Onorato are
embodied in Article 74, paragraph 3 of the UNCLOS. The third principle, however, is
the opposite of Article 74, paragraph 3.
Onorato further added that there is an existing General Principle of Law
recognized by civilized nations.213 According to him, both international and municipal
laws, provide rules for the sharing of petroleum resources. At best, if they cannot be
considered as general principles, they can be considered as supporting the opinio juris
of a crystallized custom.214
210 Id., p.327-328.
212 Id.
213 Onorato, supra note 38, p.327-328.
214 Id.
63
5. Ongs Opinion
David Ong is considered an expert in the field of JDA. He was a consultant of
Guyana in the Guyana-Suriname Maritime Boundary Delimitation Arbitration in
2007.215 He is also the technical expert and the resource person on Joint Development
at the Second United Nations Development Programme. 216 Moreover, his works has
been published in the American Journal of International Law, the European Journal of
International Law and the Irish Yearbook of International Law.217
Ong affirms that there are no multilateral treaties that provide for the obligation
to conclude JDAs.218 However, the opinio juris of the proposed custom requiring States
to conclude a JDA may still be gleaned from other sources of international law, namely
the United Nations General Assembly Resolutions (UNGA Resolutions) and
instruments, the analogous provisions of the UNCLOS and the opinions of most highly
qualified publicists (MHQP).219
215
Katholieke
Universiteit
Leuven.
David
M.
http://www.law.kuleuven.be/meel/faculty/Ong (last accessed 15 June 2012).
216 Id.
217 Id.
218 Ong, supra note 39, p.780.
219 Id.,
Ong,
available
at
64
a. UNGA Resolution: The 1974 Charter
The UNGA Resolution that governs the sharing of natural resources is the 1974
Charter of Economic Rights and Duties of States. (1974 Charter). 220 Article 3 of the
1974 Charter provides that States have a duty to cooperate in the exploitation of shared
natural resources.221 Article 3 specifically provides:
[i]n the exploitation of natural resources shared by two or more countries,
each State must co-operate on the basis of a system of information and
prior consultations in order to achieve optimum use of such resources
without causing damage to the legitimate interest of others. 222 (Emphasis
supplied)
He argues that it is inappropriate to imply a legal obligation out of the said

Resolution.223 He provides that the purpose of creating the resolution is to determine
the issue of expropriation of foreign assets under the guise of nationalization. 224
Sharing of resources is only incidental to the main purpose. 225 In other words, Ong
argues that the consent given by States in this GA Resolution is ambiguous and
220 Id., at p.781; citing Declaration on Principles of International Law concerning Friendly Relations
and Co-operation among States in accordance with the Charter of the United Nations, GA Res. 2625
(XXV), UN GAOR, 25th Sess., Supp. No. 28, at 121, UN Doc. A/8028 (1970) [hereinafter 1974
Charter].
221 1974 Charter, Art. 3.
222 Id.
224 Id.; citing D. J. HARRIS: CASES AND MATERIALS ON INTERNATIONAL LAW 550 (5th ed. 1998).
65
indicative of opinio non juris because the circumstances that led to the creation of the
GA Resolution shows that States possessed a different motive when they signed the
treaty.
b. UNEP Guidelines
United Nations Environment Programme (UNEP) came up with the Draft
Principles of Conduct in the Field of the Environment for the Guidance of States in the
Conservation and Harmonious Utilization of Natural Resources Shared by Two or More
States (UNEP Guidelines), which provided more substantive provisions related to
sharing of natural resources.226 Ong argues that the General Assembly (GA) did not
see the UNEP Guidelines as obligatory.227 According to Ong, the GA:
[r]equests to use the principles as guidelines and recommendations in the
formulation of bilateral or multilateral conventions regarding natural
resources shared by two or more States, on the basis of the principle of
good faith and in the spirit of good neighbourliness.228 (Emphasis Supplied)
Since the GA only request States to adopt the principles in a subsequent

convention, it is not obligatory on the part of the States to cooperate when it comes to
226 Id.
227 Id.; citing GA Res. 34/186, UN GAOR, 34th Sess., Supp. No. 46, at 123, UN Doc. A/34/46 (1979).
[UNEP Guidelines]
66
shared resources.229 Again, the consent of the States-members to the UNEP Guidelines
is indicative of opinio non juris.
c. UN Convention on the Law of the Sea
Ong then went to discuss the provisions of the UNCLOS. The provisions of
the UNCLOS not only define the maritime boundaries but also govern the peaceful
resolution of overlapping territorial claims and promote cooperation among States. 230
Article 123 provides for a rule on cooperation. 231 It states that States bordering an
enclosed or semi-enclosed sea should co-operate with each other in the exercise of
their rights and in the performance of their duties.232
He further added that this rule had guided a number of concluded JDAs. 233 However,
he argued that just because the JDAs adopted the principle of cooperation does not
mean that these States already believe that cooperation among coastal States is a legal
229 Id.
230 UNCLOS, supra note 36, pmbl.
231 Id. art. 123. See UNCLOS, pmbl..
232 Id.
67
obligation.234 Ong posits the view that Article 123 of the UNCLOS lacks legal force to
compel States to conclude JDAs.235 He said:
However, two factors cast doubt on the legal force of the duty to cooperate
in this article. First, the language of the article does not incorporate a
specific and legally enforceable obligation, being more exhortatory than
obligatory. Second, the requirements for cooperative efforts specify such
activities as the conservation of marine living resources, protection of the
marine [environment] and coordination of marine scientific research,
rather than the joint development of hydrocarbon and other nonliving
resources.236 (Emphasis supplied)
Here, Ong asserts again the ambiguity of the acts of the States-members of the
UNCLOS. The language of Article 123 shows that States do not perceive a legal
obligation to conclude a JDA when they agreed to include Article 123 in the
UNCLOS.237 Nonetheless, it is expressly provided in the quote above that the words of
Article 123 provides that it is an obligation to enter into cooperation with regard to
marine scientific research but not with regard to joint development of
hydrocarbon.238 Therefore, Article 123 of the UNCLOS is indicative of opinio non
juris and not opinio juris.
234 Id.
235 Id.
236 Id.
237 Id.
68
d. Proving Opinio Juris
Following the approach suggested by the Committee, if there are acts indicative
of opinio non juris, proving opinio juris becomes necessary.239 How does one prove
the existence of opinio juris?
There is no established standard for proving the
existence of opinio juris. However, Ong argues that most writers agree that a higher
burden of proof must be imposed.240 How is this higher burden of proof satisfied by a
State?
Bin Cheng discusses the definition of burden of proof in international law.241
Although no rules of procedure are found in existing international laws, parties must
still prove their claims because the State who claims has the burden of proving. 242 This
burden is satisfied if the claimant is able to produce evidence and to disclose the
facts of the case.243
What is kind of evidence is required to prove opinio juris? The evidence may
239 See Section III (A) (3); citing London Conference, supra note 120, p. 30-31.
240 Id.,at 794.
241 BIN CHENG, supra note 123, p.327-328
242 Id.
243 Id.
69
be a showing of the States physical or verbal acts. These acts must essentially prove
that the States consider these actions incumbent on them in conforming to the alleged
rule.244 In other words, States must conform to the practice out of a belief that it is
obligatory on their part.245 Without any evidence that States believe that cooperation is
a legal obligation, opinio juris can only be inferred.246 However, the higher burden of
proof cannot be overcome by mere inference without proof.247
Finally, Ong posits that State practice on joint development of common
deposits simply evinces no norm-creating behavior, despite its increasing frequency
and apparent consistency.248 Consequently, opinio juris does not exist even though
there is State practice.
B. Possible Existence of a Regional Custom
Ong did not discount the possibility that a regional custom may exist in regions
where States have overlapping claims over an area rich in petroleum resources and
245 Id.
246 Id., p.793-794.
247 Id.
248 Id. p.795.
70
have attempted or have already entered into agreements with each other.249 These
regions, according to him, are the North Sea, Mediterranean Sea, the Persian Gulf, and
South China Sea.250 However, he cautioned the proponents of a regional custom that
ICJ jurisprudence still required that opinio juris must still be proved.251 This was part
of the decision of the ICJ in the cases of the Right of Passage over Indian Territory and
the Anglo-Norwegian Fisheries cases.252
In the Right of Passage over Indian Territory, Portugal and India are in dispute
as to whether India must grant Portugal a right of passage. 253 This right is premised on
the alleged existence of a local custom, which India contests.254 The Court sees no
reason why [the] long continued practice between [the] two States . . . should not form
249 Id.; citing Right of Passage (Port. v. India), Judgment, p.39, available at http://www.icjcij.org/docket/files/32/4521.pdf (last accessed 21 June 2012); citing Fisheries Case (U.K. v. Nor.),
Judgment, p.131 (Dec. 18, 1951), available at http://www.icj-cij.org/docket/files/5/11019.pdf?
PHPSESSID=fe8692d664a02d5cc0521b630ba2af6b (last accessed 19 June 2012).
251 Id., p.793-795
252 Id.
253 Right of Passage, 1960 I.C.J. at p.39.
254 Id.
71
the basis of mutual rights and obligations between the two States. 255 Because Portugal
was able to prove that it did exercise control over the disputed area, the ICJ decided that
India is obliged to grant Portugal a right of passage.256
On the other hand, in the Anglo-Norwegian Fisheries cases, the United
Kingdom is disputing the legality of the Norwegian Decree of 1935 establishing the
limits of Norwegian fisheries jurisdiction, 257 which is contrary to the ten (10) mile limit
rule of the U.K. The U.K. seeks the application of the ten (10) mile limit not only to
bays but also to straights.258 However, the ICJ refused to grant an analogous application
of the 10-mile limit of baselines.259 [T]he practice of states does not justify the
formulation of any general rule of law. The attempts that have been made to subject
groups of islands or coastal archipelagoes to conditions analogous to the limitations
concerning bays . . . have not got beyond the stage of proposals.260
255 Id.
256 Id., p.45.
257 Fisheries case, 1951 I.C.J. at p.133.
258 Id., at p.131.
259 Id.
260 Id.
72
Nevertheless, the decision of the Court recognizes that a special rule or an
exceptional system may be made to apply only to a limited number of States. 261
However, this cannot be applied in that case.
In both Right of Passage over the Indian Territory, and Anglo-Norwegian
Fisheries cases, the ICJ pronounced that in proving the existence of a regional custom,
same requirements of State practice and opinio juris must still be shown.
C. No International Obligation to Conclude a JDA
Contrary to the position of Onorato, there is no customary duty to conclude a
JDA.
In contrast to the prevailing practice in the North Sea region, previously
concluded JDAs do not support the existence of opinio juris. In the absence such an
element, no State practice can be said to have crystallized into a custom. Last but not
the least, there is also no regional custom requiring the conclusion of JDA in the
Southeast Asian region.
1. There is State Practice
a. Physical and Verbal Acts
Entering into a JDA can be considered as both physical and verbal act. JDAs
are physical acts concluded by the Heads of States or their representatives.
The
physical act involved is the signing of the agreement. The JDA itself is also a verbal
act. A JDA is a diplomatic statement that expresses the States position to maintain
261 Id.
73
good relations and the States recognition that unresolved issues between the States
shall be resolved by adopting the rules under international law.262
b. Acts performed by the State
Moreover, the Committee posits that the act must be done by qualified
representatives of the States,263 such as a Head of State. A Head of State is a person
exercising elements of governmental authority whose actions and inactions can bind
the State.264 Therefore, when the Heads of States entered into a JDA, their act can
contribute to the establishment of a State practice.
c. Public and Undisclosed Act
A JDA is also a public act. JDAs are concluded between States.265 As posited
by the Committee, an act is considered public if another State became aware of the act.
The number of States that became aware of the act need not be large. 266
The
262 Treaty between the Federal Republic of Nigeria and the Democratic Republic of Sao Tome and
Principe on the Joint Development of Petroleum and other Resources, in respect of Areas of the
Exclusive Economic Zone of the Two States, Nig.-Sao Tome & Principe, pmbl., 21 February 2001
(entered into force 16 January 2003).
264 SHAW, supra note 89, p.134, 787.
265 See J. TANGA BIANG, THE JOINT DEVELOPMENT ZONE
BETWEEN NIGERIA AND SAO TOME AND

PRINCIPE: A CASE OF PROVISIONAL ARRANGEMENT IN THE GULF OF GUINEA: INTERNATIONAL LAW,
STATE PRACTICE AND PROSPECTS FOR REGIONAL INTEGRATION. ABSTRACT (2010) [hereinafter NIGERIA
JDA].
74
requirement is that [i]t must be communicated to at least one other State. 267 More
importantly, the source of information need not be the Government itself. 268 Press
statements269 and, by analogy, writings may constitute as communication to other
States.
In JDA entered into by Nigeria and Sao tome & Principe, J. Tanga Biang, a
diplomat working under the Division of Legal Affairs and Treaties of the Republic of
Cameroon, reported the details of the JDA, which was publicized by the Division for
Ocean Affairs and the Law of the Sea (DOALOS). 270 In the same work, other JDAs
were also revealed like the one entered into by Australian and Indonesia, Japan and
South Korea and others.271 His work, along with the other works of similar nature,
functions as an announcement to the world that a certain practice among disputing
266 London Conference, supra note 120, p.15
267 Id.
268 Id.
269 Id.
270 See generally NIGERIA JDA, supra note 265, xi-xii, appendices 1-19.
271 Id.
75
States is beginning to mature into a custom. Therefore, this element of creating a State
practice is present.
d. Uniform, Extensive and Representative
Both internal and collective uniformity are present.
To reiterate, internal
uniformity is explained in the Nicaragua case as inconsistencies between what a State

says is the law and what it does.272 Collective uniformity, on the other hand, looks into
the inconsistencies between the acts of the States.273
The practice of States parties to the North Sea Continental Shelf cases evinced
the consistency between the domestic and international laws.
The international
obligation is to reach [an] agreement on joint exploration.274 The States-parties in that

case had enacted municipal laws relating to apportionment of common petroleum
deposits.275 Weems and Fallon observed that the domestic laws of U.K. and Norway
had incorporated provisions relating to the unit(ization) or cooperative development of
adjoining licen[s]e tracts.276 Such an observation proves the existence of internal
uniformity.
272 Id.; citing Military and Paramilitary Activities In and Against Nicaragua, supra note 156.
273 London Conference, supra note 120, p.22-23.
274 Onorato, supra note 38, p. 326.
275 Id., p.328. (1967).
76
Collective uniformity is also present. In the area of North Sea alone, there are
already six States who have agreed to enter into a JDA with other neighboring States. 277
In the WPS area, there are three Malaysia, Thailand and Vietnam. 278 Other States who
have entered into similar arrangements are Bahrain, Saudi Arabia, Kuwait, Norway,
Iceland, France, Spain, Japan, South Korea, Argentina, Great Britain, Colombia,
Jamaica, Barbados, Guyana, Tunisia, Algeria, Nigeria and Sao Tome and Principe.279
Moreover, the number of States who have entered into a JDA and the major
interests of these participating States evince that the practice is extensive and
representative. Indeed, major interested States in the oil producing industry, like Saudi
Arabia (Worlds largest producing country), Nigeria (10th), Kuwait (11th), Norway (15th),
Algeria (16th), United Kingdom (21st), Colombia (26th), Argentina (27th), Malaysia
(28th), Thailand (33rd), and Denmark (39th) have adopted the same practice.280
276 See PHILIP WEEMS
AND ARCHIE FALLON, STRATEGIES FOR DEVELOPMENT OF CROSS-BORDER

PETROLEUM RESERVIORS FOOTNOTE 12; citing Joseph W. Morris, The North Sea Continental Shelf Oil
and Gas Legal Problems, 2 INTL LAW. 191, 206
277 Id., p.325-326.
278 Nguyen Hong Thao, supra note 37, p.1.
279 NIGERIA JDA, supra note 265, xi-xii.
280 Id.; Central Intelligence Agency, Country Comparison: Oil Production, available at
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2173rank.html (last accessed 15
June 2012) (The ranks are arranged by the quantity of oil produced).
77
e. Duration requirement
The Committee did not gave much importance to the period of time because of
the decision of the ICJ in the North Sea Continental Shelf cases, which held that a
custom may still exist even though the practice had not been in existence for a long
period of time.281 Nevertheless, the first JDA entered into was in 22 February 1958
between Saudi Arabia and Bahrain.282 Up to the present time, the practice still exists. 283
Therefore, it can be said that the this element of State practice is present.
2. There is No Opinio Juris for a General Custom
The differing views of Onorato and Ong had been discussed above. Onoratos
primary basis is the practice of States. The method adopted by Onorato finds support in
the Final Report prepared by the Committee of most highly qualified publicists. To
reiterate, they are of the view that if the existence of the elements of State practice is
shown, proving opinio juris becomes a matter of course.284
However, the Committee, in the later part of their work, qualified their position.
They added that if the acts constitutive of opinio non juris exist, the necessity of
281 London Conference, supra note 120, p.20.
282 NIGERIA JDA, supra note 265, p.56.
283 Id., p.93.
284 London Conference, supra note 120, p.30-31.
78
proving opinio juris arises. Without using the term opinio non juris, Ong follows the
same track and argued that the treaties and resolutions do not evince opinio juris. In
other words, what Ong is trying to prove is that the obligations embodied in these
treaties and resolutions evince opinio non juris and not opinio juris.
Hence, the
presence of opinio juris still needs to be proved.

Ong cited Onorato in his work and in the course of his discussion on why there
can be no custom requiring States to conclude JDAs, he criticized Onoratos position.
As can be seen in the previous sub-sections of this chapter, Ong primarily proposes that
there is no opinio juris to the custom by looking at the relevant conventions and other
international documents that may propose the existence of an opinio juris.
This
approach of Ong is dual in purpose: first, to reject the proposition of Onorato that there
is a body of international law supporting the existence of both general principle of law
and custom; and second, to prove that there is no opinio juris.
This study shares the same position as Ong and believes that there is really no
customary duty to conclude a JDA. There has been no decision yet by the ICJ or any
other international tribunals on this issue. Therefore, in the event that one is raised
before them, this study can serve its purpose. Therefore, to further strengthen Ongs
opinion, this study seeks to add more to his work by applying the principles formulated
by the Committee. To reiterate, the members agreed that there could be a crystallized
custom as soon as a State practice is proven.285
285 Chapter III.
However, this view was further
79
qualified that if there are indications that opinio non juris may exist, the existence of
opinio juris must be proven.286 To add on to the opinion of Ong, it will be shown that
opinio non juris exist and opinio juris was not proven.
a. Opinio non juris: Article 123 of the UNCLOS
There is a duty to cooperate under the UNCLOS and it is expressed in several
provisions: Article 118 (Cooperation of States in the conservation and management of
living resources), Article 123 (Cooperation of States bordering enclosed or semienclosed areas), Article 129 (Cooperation in the construction and improvement of
means of transport), Article 197 (Cooperation in a global or regional basis), Article 242
(Promotion of international cooperation), Part XIV Section 2 (International
Cooperation), Article 278 (Cooperation among international organizations), and the
second paragraph of the Preamble.
286 Id.
80
The closest provision to the sharing of petroleum resources is Article 123.287 A
careful reading reveals that the said Article does not touch upon the issue of sharing
non-living resources, such as oil and natural gas. Subsection (a) states that Article 123
only covers the cooperation in the management of living resources, such as fishes, and
in the protection and preservation of the marine environment.
Subsection (c) imposes a duty to cooperate in the conduct of a scientific
research. However, scientific research in this provision does not involve oil and natural
gas resource. Ejusdem generis, a principle in statutory construction, states that the
interpretation of an undefined term must be done in light of the words used with it. The
first two sub-provisions refer to the marine living resources. Following the rule on
construction, scientific research must be understood as the study of the living resources
and not the non-living resources.
287 UNCLOS, supra note 36, art. 123. Article 123 provides:
States bordering an enclosed or semi-enclosed sea should cooperate with
each other in the exercise of their rights and in the performance of their
duties under this Convention. To this end they shall endeavour, directly or
through an appropriate regional organization:
(a) to coordinate the management, conservation, exploration and
exploitation of the living resources of the sea;
(b) to coordinate the implementation of their rights and duties with respect
to the protection and preservation of the marine environment;
(c) to coordinate their scientific research policies and undertake where
appropriate joint programmes of scientific research in the area;
(d) to invite, as appropriate, other interested States or international

organizations to cooperate with them in furtherance of the provisions of
this article. (Emphasis supplied).
81
Nonetheless, to coordinate a scientific research is not the same as sharing in the
exploration, exploitation and utilization of oil and natural gas. At best, it may be close
to the concept of exploration. However, exploration is but a phase in the process of
developing oil and natural gas reserves.288 In other words, assuming that there is an
obligation to cooperate in the exploration, the same does not mean that there is also an
obligation to cooperate in the exploitation and utilization. To accord such interpretation
would produce injustice.
Last but not the least, Article 123 used the term endeavor that does not
connote an obligation to conclude a cooperative agreement. The dictionary meaning of
endeavor is to attempt (as the fulfillment of an obligation) by exertion of effort. 289 In
interpreting the words of a Statute, the common and ordinary meaning of the word must
be used.290 To do otherwise would be a violation of the VCLT. Therefore, the language
and the circumstance considered by this Article do not contribute to the creation of a
custom.
288 GOVERNMENT DU QUEBEC, supra note 58.
289 Merriam-Webster. Endeavor, available at http://www.merriam-webster.com/dictionary/endeavor

290 VCLT, supra note 74, Article 31(1).
82
b. Opinio non juris: Article 3 of the 1974 Charter
Aside from the UNCLOS, the 1974 Charter of Economic Rights and Duties of
States also provided some indications of opinio juris. However, David Ong refutes this
by arguing that the purpose of its creation is not cooperation. 291 And if it is to promote
cooperation, the language employed in the said Charter does not support the existence
of a legal obligation to cooperate.
Article 3 provides that States must co-operate. However, the requirement is
qualified by the phrase system of information and prior consultations.292 Information
and consultation refers to exchange of information, notification of plans, consultations,
immediate
information-sharing
in
emergency
situations,
mutual
assistance,
responsibility and liability, international dispute settlement, equal access to

administrative and judicial proceedings, and equal treatment of persons affected in
other States.293
Therefore, cooperation does not mean conclusion of a sharing
agreement. Rather, it means the obligation of States to maintain good relations. Hence,
the language used by the treaty indicates that the act of the States members in the said
Charter is ambiguous and not conclusive of opinio juris. In other words, the acts of the
291 Ong, supra note 39, p.781; citing UNEP Guidelines.
292 Ong, supra note 39, p.781; citing GA Res. 3281 (XXIX), UN GAOR, 29th Sess., Supp. No. 30, at
50, UN Doc. A/9030 (1974)
293 NICO SCHRIJVER, DEVELOPMENT WITHOUT DESTRUCTION: THE UN

MANAGEMENT 58.
AND
GLOBAL RESOURCE
83
States of creating the 1974 Charter of Economic Rights and Duties of States are
indicative of opinio non juris.
c. No Proof of Opinio Juris
Proving opinio juris is required when there are indications of opinio non juris.
However, Onorato failed to adduce qualified evidence to prove the existence of opinio
juris. Ongs discussion of the 1974 Charter, UNEP Guidelines and the UNCLOS
reveals that there is no opinio juris. Even though these treaties have for their object the
establishment of cooperation over shared petroleum resources, the States that signed
them did not believe that cooperation is an obligation. Consequently, Ong disproved
Onoratos proposition that there is an existing custom requiring the conclusion of a
JDA. At best, the duty to conclude can only exist in the North sea region. Therefore,
States outside that region, including the Southeast Asian States, are not bound to
comply.
D. No Regional Custom in Southeast Asia Exists
David Ong mentioned the concept of regional custom. He even stated that the
WPS is a possible nest for the creation of a regional custom requiring the conclusion of
JDAs. However, he did not delve into the discussion and left the issue of whether it
exist.
Ten States belong to the Association of Southeast Asian Nations (ASEAN).
Out of the ten, two namely, Laos and Singapore, do not possess oil reserves. 294
294
Central Intelligence Agency, East & Southeast Asia: Laos, available at

https://www.cia.gov/library/publications/the-world-factbook/geos/la.html (last accessed 21 June 2012);
Central
Intelligence
Agency,
East
&
Southeast
Asia:
Singapore,
available
at
https://www.cia.gov/library/publications/the-world-factbook/geos/sn.html (last accessed 21 June 2012).
84
Therefore, they are do not have the capacity to enter into a JDA and their omission
cannot be considered in establishing State practice. Out of the remaining eight ASEAN
States, four States entered into JDAs. These states are Malaysia, Thailand, Vietnam,
and Indonesia.295 Brunei Darussalam are convening individually with Malaysia for a
possible joint development agreement296 while the Philippines and Myanmar (Burma)
do not have existing joint development agreements. Lastly, Cambodia does not have
any agreement with Thailand or Malaysia.297
Following the rulings in the Right of Passage over Indian Territory and the
Anglo-Norwegian Fisheries cases, little as it may seem, four out of ten States can still
evince State practice. However, opinio juris must still be proven. In the case of the
ASEAN States, there is none. The four ASEAN States that entered into their respective
JDAs are motivated by economic prosperity. Indeed, the preamble of the JDA between
Indonesia and Australia, otherwise known as the Timor Gap Treaty,298 provides that the
States are desiring to enable the exploration for and exploitation of the petroleum
295 See generally Nguyen Hong Thao, supra note 37; Anthony Heiser. East Timor and the Joint
Petroleum Development Area. 17 AUSTL. & N.Z. MARITIME L.J. 1 (2003).
296 JOVAN SARAVANAMUTTU. MALAYSIAS LUCRATIVE APPROACH
TO JOINT DEVELOPMENT IN
TROUBLED SEAS 1, available at http://www.iseas.edu.sg/viewpoint/js16may10.pdf (last accessed 15 June
2012)
297 U.S. ENERGY INFORMATION ADMINISTRATION. SOUTH CHINA SEA.
85
resources of the continental shelf and encourage and promote development of the
petroleum resources of the area and desiring that exploration and exploitation of these
resources proceed without delay.299 The same intention appears in the JDA entered
into between Malaysia and Thailand, and between Malaysia and Vietnam. Therefore,
without opinio juris, no regional custom can bind the ASEAN States to enter into a
JDA.
IV.
INTERNATIONAL OBLIGATION TO NEGOTIATE A JDA

A. The Duty to Negotiate in Good Faith
Although there is no customary law requiring States to enter into a JDA, 300 a
more express and definite duty exist in international law. Article 74, paragraph 3 of the
UNCLOS provides that:
[p]ending agreement as provided for in paragraph 1, the States concerned,
in a spirit of understanding and cooperation, shall 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. Such arrangements shall be without prejudice to the final
delimitation.301 (Emphasis supplied)
298 1989 Treaty between Australia and the Republic of Indonesia on the Zone of Cooperation in an
Area between the Indonesian Province of East Timor and Northern Australia, Austl.-Indon., pmbl., Dec.
11, 1989.
299 Margaret Hanlon, Australia-Indonesia Maritime Boundaries, at 7 (Ph.D. dissertation, University of

Wollongong),
available
at
http://arts.monash.edu.au/psi/news-and-events/apsa/refereedpapers/international-relations/hanlon.pdf (last accessed 19 June 2012).
300 See supra Chapter IV (C).
86
The duty to make every effort to enter into provisional arrangements of a
practical nature or the duty to negotiation in good faith is too broad to imply a legal
duty. However, the two decisions of the ICJ in the Delimitation of the Maritime
Boundary in the Gulf of Maine Area and North Sea Continental Shelf cases
indoctrinates that this is a positive duty of States and not just a mere policy.
1. ICJ Decisions on Good Faith Negotiations
By express provision of the UNCLOS, States are duty-bound to make every
effort to enter into provisional arrangements.302 Dominic Roughton, a partner in a
Public International Law Group, Herbert Smith LLP, otherwise termed the abovestated
obligation as the duty to negotiate in good faith. 303 This obligation has been affirmed in
a number of ICJ decisions namely, the Delimitation of the Maritime Boundary in the
Gulf of Maine Area case,304 North Sea Continental Shelf cases,305 and in the Advisory
Opinion of the ICJ in the Railway Traffic between Lithuania and Poland. Roughton
301 UNCLOS, supra note 36, Article 73 3
302 Id.
303 Roughton, supra note 34, p. 9.
304 See Roughton, supra note 34.
305 Id.
87
used the first two of the three cases mentioned in his work, which will be discussed
briefly in this part of the study.
In the Delimitation of the Maritime Boundary in the Gulf of Maine Area case,
Canada and the United States of America (US) both submitted different proposals in
dividing the overlap of their continental shelves and EEZs.306 However, both States did
not give in to each others proposal. 307 Since they mutually rejected each others
proposal, both States entered into negotiations until they later decided to raise the
matter to the ICJ.308 The ICJ held, in part, that:
No maritime delimitation between States with opposite or adjacent coasts
may be effected unilaterally by one of those States. Such delimitation must
be sought and effected by means of an agreement, following negotiations
conducted in good faith and with the genuine intention of achieving a
positive result. Where, however, such agreement cannot be achieved,
delimitation should be effected by recourse to a third party possessing the
necessary competence.309 (Emphasis supplied)
In this case, the Court held that both negotiating States must have the genuine
intention of achieving a positive result or the parties should not leave the negotiation
tables empty-handed. Positive result does not mean that every negotiation should end
306 Delimitation of the Maritime Boundary in the Gulf of Maine Area, I.C.J. at 12; see generally,
Roughton, supra note 34.
307 Delimitation of the Maritime Boundary in the Gulf of Maine Area, Judgment, 1984 I.C.J. Rep.
p.254.
308 Id. (Neither Party shall introduce . . . the nature or content of proposals . . . in the course of
negotiations or discussion between the Parties undertaken since 1969.)
309 Id., at 112.
88
up successful. Otherwise, the negotiation becomes an obligation to conclude. It means
that if the negotiations fail, at least the parties carried with them the knowledge
necessary to make future negotiations become successful. On the other hand, if the
negotiation is a success, then they carry with them a binding agreement.
In the North Sea Continental Shelf cases, the ICJ held that States are under an
obligation so to conduct themselves that the negotiations are meaningful, which will
not be the case when either of them insists upon its own positions without
contemplating any modification of it.310 (Emphasis supplied)
Here, the ICJ held that the parties must be willing to adjust their original
position. However, the Court did not continue to provide any instructions as to what
kind of modifications is required and how significant must the modifications be.
The ICJ also reiterated in its Advisory Opinion in the case of Railway Traffic
between Lithuania and Poland that States must not only to enter into negotiations but
also to pursue them as far as possible with a view to concluding agreements. 311 A good
faith negotiation in this case was described as negotiations with a goal as opposed to a
negotiation without, at the least, a purpose.
Despite the ICJ pronouncements explaining that the duty to negotiate is one of
good faith, the true meaning of good faith still presents itself as an issue. [G]enuine
310 North Sea Continental Shelf Cases, 1969 I.C.J. at p.46, 85 (a).
311 Railway Traffic between Lithuania and Poland (Railway Sector Landwarw-Kaisiadorys),
Advisory Opinion, 1931 P.C.I.J. (ser. A/B) No. 42 (Oct. 15), at p.12.
89
intention,312 without contemplating any modification 313 and with a view to
concluding agreements,314 are still too broad to require an obligation.
More
importantly, the test in determining the instances when States negotiate in bad faith is
still absent.
2. Interpreting Negotiation in Good Faith under Articles 74.3 and
83.3
Although the ICJ did recognize the duty to negotiate in good faith, the
pronouncements in the Delimitation of the Maritime Boundary in the Gulf of Maine
Area case and North Sea Continental Shelf cases are still too general and will still
require a more specific rule in order to ensure that States did comply with it. Resort to
the provisions in the Vienna Convention on the Law of Treaties (VCLT) regarding
interpretation of treaties is warranted.
a. Vienna Convention on the Law of Treaties
In interpreting a treaty, Article 31 of the VCLT provides that [a] treaty shall be
interpreted in good faith in accordance with the ordinary meaning to be given to the
312 Delimitation of the Maritime Boundary in the Gulf of Maine Area, Judgment, 1984 I.C.J. Rep. at
87.
313 North Sea Continental Shelf Cases, 1969 I.C.J. at 85 (a).
314 Railway Traffic between Lithuania and Poland, 1931 P.C.I.J. at p.12.
90
terms of the treaty in their context and in the light of its object and purpose. 315 The
Commentary of the VCLT provided four standards. 316 First, the interpretation must use
the ordinary meaning of the word.317 Second, it must be in accordance with the context
or how the word is used in the treaty.318 Third, the interpretation must be in accordance
with the object and purpose of the Treaty.319 Lastly, the interpretation must be done in
good faith.320
The States are allowed to interpret the treaties it entered into. 321 States can also
resort to the interpretation of the International Courts in instances when States agreed to
315 VCLT, supra note 74, Article 31(1).
316 VIENNA CONVENTION
ON THE LAW OF TREATIES: A COMMENTARY, 541-549 (Oliver Dorr and

Kirsten Schmalenback, eds., 2012); citing Draft Articles on the Law of Treaties with Commentaries, ILC
Report 18th Session [1966-II] YbILC 177274, Commentary to Art 27, 221 12 [hereinafter VCLT
Commentary].
317 Id., 541-543.
318 Id., 543-545.
319 Id., 545-548.
320 Id. 548-549.
321 VCLT COMMENTARY., supra note 316, 530 18 (every person or organ concerned with a treaty is .
. . competent to interpret it).
91
such arrangement in the treaty.322 According to the UNCLOS, the ICJ was among the
sources of interpretation.323 However, if the interpretation of the International Courts,
like the ICJ, is inadequate, interpretations of person[s] reasonably informed on the
subject matter is, therefore, proper.324
Indeed, under Article 38 paragraph 1 of the Statute of the ICJ, the ICJ can apply
judicial decisions and the teachings of the most highly qualified publicists in deciding
a case, which may involve the interpretation of a treaty.325 Therefore, judicial decisions
of the Philippine Supreme Court, the United States National Labor Relations Board and
works of the experts in negotiations can be used in interpreting the meaning of good
faith negotiations.
3. Domestic Courts Interpretation of Good Faith Negotiations
a. Philippine Supreme Courts Interpretation
The duty to negotiate in good faith was intepreted in the Philippine Supreme
Court decision in Kiok Loy v. NLRC. In that case, the union gave the employer their
322 Id., 531 (Those organs then regularly assume an authoritative role in determining the actual
meaning of the treaty provisions, the more so when their decisions concerning the interpretation are given
binding force in the treaty itself.).
323 UNCLOS, supra note 36, Article 287 1.
324 VCLT Commentary, supra note 316, at 542;
325 Statute of the ICJ, supra note 120.
92
proposed Collective Bargaining Agreement.326 The employer did not give any counterproposal or similar type of answer to the employees proposal. 327 Consequently, the
National Labor Relations Commission (NLRC) and the Supreme Court held that the
employer, Kiok Loy, is guilty of unfair labor practice.328
The SC held that [a]
Company's refusal to make counter proposal if considered in relation to the entire

bargaining process, may indicate bad faith and this is specially true where the Union's
request for a counter proposal is left unanswered.329
b. United States NLRB Decision: Proposal and Counterproposal
The logic displayed in the Philippine SC decision above had long existed since
1930s in the United States Legal System. It was opined that the test of bad faith in
negotiation is the employers state of mind. 330 In other words, sincere effort . . . to
326 Kiok Loy vs. NLRC, 141 SCRA 179, 183 (1986).
327 Id.
328 Id., 184, 186.
329 Id., 186; citing Teller, II Labor Disputes & Collective Bargaining 889; citing Glove Cotton Mills
vs. NLRB, 103 F. (2nd) 91.
330 Archibald Cox, To Bargain in Good Faith, 71 (8) HARV. L. REV. 1401, 1414; citing Houde
Engineering Corp., I N.L.R.B. (old) 35 (I934).
93
reach common ground is the test of good faith. 331 The Court cited the old National
Labor Relations Boards opinion, which states that the employer is to match [the
employees] proposals, if unacceptable, with counter-proposals.332
Two alternatives are therefore available to the negotiating parties. They may
either accept the proposal or reject it by reciprocating the proposal with a counterproposal. Consequently, parties may not reject the proposal without a counter-proposal.
More importantly, there must first be a proposal by one or both of the parties.
4. Expert Opinion of Good Faith Negotiations
This study further argues that the proposals and counter-proposals must contain
provisions that are reasonable to the proponent and acceptable to the recipient. The test
in order to know that the proposal is reasonable and acceptable can be further gleaned
from the works of ONeill and Sebenius whose expertise are in the field of negotiation.
a. The Game Theory
According to Barry ONeill, [t]he essence of game theory is rather that each
player considers the others view of the conflict as part of its own choice of strategy. 333
In other words, the offer must also consider not only ones self-interest, but also that of
331 Id.
332 Id.
333 BARRY ONEILL, A SURVEY
OF GAME THEORY MODELS

Aumann and S. Hart, eds. Handbook of Game Theory) 4.
ON
PEACE
AND
WAR (Prepared for R.
94
party offered. Another expert explains in detail what the game theory is. First, the
Game theory takes into consideration the fact that the parties are interdependent. 334
This means that the parties may either benefit or suffer depending on what would be the
action of the other party.335 In the words of McMillan, [t]he distinctive feature of a
game is the presence of interdependencies among the agents: on agents utility depends
not only on his own actions, but also on the actions of each of the other agents.336
Next in point is that the Game theory recognizes two possible scenarios: one is a
zero-sum game and the other is a nonzero-sum game.337 Simply stated, the former
results to a win-lose situation while the latter results to a win-win situation. 338 Again,
McMillan explained this in a manner stated below:
In a zero-sum game, the sum of all agents utilities is always zero. A zerosum game is a game of pure conflict: what one agent wins, some other
agents must lose.
...
[On the other hand] [n]onzero-sum games have elements of both conflict
and cooperation. It is in the agents mutual interest to reach an outcome
334 JOHN MCMILLAN. GAME THEORY IN INTERNATIONAL ECONOMICS. 4.
335 Id.
336 Id.
337 Id., p.5.
338 Id.
95
where the sum of utilities is relatively high; but the agents interests
conflict over their shares in that sum.339
As explained above, a nonzero-sum game model suggests a win-win situation

for both parties.340 This situation can only be achieved if both parties cooperate.341
However, this does not mean that the parties are no longer allowed to impose a greater
share.342 Assuming the cooperation between the parties is beneficial to both of them,
the conflict shifted to the determination of the terms of the agreement. 343
In
determining the contents of the agreement, the Negotiation Analysis Approach

suggested by James Sebenius proves to be helpful.
b. Improved Game Theory: The Negotiation Analysis
Approach
James Sebenius acknowledges the usefulness of the Game theory in finding the
equilibria or the proposal where both parties equally achieve the optimal choice. 344
339 MCMILLAN, supra note 334.
340 Id.
341 Id.
342 Id.
343 Id.
96
However, it only proves to be useful when the other party also chooses the best
option.345 Consequently, a pure game theory approach does not result generally to an
optimal choice because, in reality, the mindset and would-be behavior of the parties is
not known to each other.346
Obviously, there is no definite process of predicting the
choice of the other party.347

In a nonequilibrium game theory with bounded rationality and without
common knowledge approach, the parties must assume that the other has a
preconceived goal and the other party will direct its choice to that goal. 348 In other
words, the mindset of the parties under this approach is goal seeking 349 rather than
optimal-choice seeking.
344 James K. Sebenius, Negotiation Analysis: A Characterization and Review, 38 (1) Management
Science 18, 18-19 (1992).
345 Id.
346 Id.
347 Id.
348 Id., at 20-21.
349 Sebenius, supra note 344, 20.
97
Knowing that the negotiating parties may choose a goal-seeking choice is
important. There is a difference between choosing what is best and choosing what is in
accordance with the goal. Between two States that have entered into negotiations, one
may either aim to satisfy nationalistic sentiments of the citizens while the other aims to
alleviate the growing economic problem of shortage in resources. As will be explained
later, the difference in interests makes the result of the negotiation a possible win-win
situation for the parties.
Therefore, in knowing what is the most advantageous option, three steps must
be followed. First, the parties must evaluate their self-interests. 350 Then, the parties
must look into possible alternatives to having an agreement with the opposing party. 351
Lastly, the parties must determine the possible benefits of having an agreement. 352 The
last step is a multi-step process of formulating a general agreement and filling up the
details to that agreement.
V.
APPLICATION OF THE NEGOTIATION ANALYSIS APPROACH TO

THE WPS DISPUTE
As discussed in the previous Chapter, the ICJ held, in two of its decisions, that
there is an obligation to negotiate in good faith. However, the interpretation of the ICJ
350 Id., at 33.
351 Sebenius, supra note 344, at 33.
352 Id.
98
is insufficient. The lack of discussion as to the contents of the agreement did not clear
the cloud. In order to determine what the contents or at least the general theme of the
contents of a JDA should include, the opinion of experts were considered. In general,
they opined that the interests of the parties are interdependent. Depending on what
their actions would be, there may either be a win-lose or win-win situation. Finally, if
they agree to a win-win situation, the conflict shifts to the sharing aspect of the
agreement.
Three basic considerations must be kept in the mind of the negotiators. First,
the parties must consider what their interests are.353 Then, they must consider what is
the benefit of a status quo or the state of no agreement.354 Lastly, they must consider the
benefits of entering into an agreement, which will primarily be determined by the
provisions of the agreement.355
A. Self-interest of the Philippines and China
1. Interest of the Philippines to the WPS Dispute
The primary interest of the Philippines over the WPS is the resources locked
inside its depths. This conclusion can be found in the Philippine laws on mining. The
whereas clauses under the Oil Exploration and Development Act of 1972 in fact states
354 Id.
355 Id.
99
that it was found necessary for the national interest . . . to provide meaningful
incentives to prospective service contractors.356 On the same note, the declaration of
policy under the Philippine Mining Act of 1995 includes a proviso stating that [i]t shall
be the responsibility of the State to promote their rational exploration, development,
utilization and conservation . . . in order to enhance national growth . . . .357
Based on the provisions of both laws, it can be derived that the drive to protect
its claim is greatly pushed by economic considerations. Indeed, the price of oil, which
is determined by its supply, has a direct effect to domestic prices of food and raw
materials. As the price of oil increases, the price for a good quality of living also
increases. Avowed to reduce poverty in the Philippines, the Philippine Government,
therefore, cannot surrender its claim over the resources in the WPS.
2. Interest of China to the WPS Dispute
Although China would need additional sources of oil and natural gas to satisfy
its growing demand for fuel,358 its primary objective in defending its claim over the
356 An Act to Promote the Discovery and Production of Indigenous Petroleum, and Appropriating
Funds Therefor [The Oil Exploration and Development Act of 1972] Presidential Decree No. 87, as
Amended, whereas clause (1972);
357 An Act Instituting a New System of Mineral Resources Exploration, Development, Utilization, and
Conservation [Philippine Mining Act of 1995], Republic Act No. 7942, 2.
358 Judy Hua, Jim Bai and Chen Aizhu. China fuel demand seen up 5.5 pct per yr to 2012 MIIT,
available at http://www.reuters.com/article/2012/02/03/china-oil-demand-idUSL4E8D331S20120203
(last accessed 10 June 2012)
100
WPS is to satisfy Chinese nationalism sentiments. 359 In fact, China sees its claim as a
right that is long overdue.360 In support to this belief, authors posits that long before the
other Asian States claim, China had already put a claim over the disputed islands in the
WPS dispute.361 In short, it is both economically and politically right for China to have
the islands, along with the resources, of the WPS.
359 Nong Hong, supra note 8; To further understand what really is the Chinese nationalism
sentiment, a paragraph in Nong Hongs work is reproduced below:
Those who interpret Chinas claims in the SCS as a threat to the regional
stability and the potential to use her increased military power to achieve
her objectives in open conflict with its neighbours should read Chinese
nationalism sentiment carefully before jumping to the conclusion. National
humiliation is a common and recurring them in Chinese public culture.
The discourse takes many forms: public histories, textbooks, museums,
mass movements, romance novels, popular songs, prose poems, feature
films, national holidays, and atlases. All these are part of a modernist
narrative in the most basic sense of a linear progressive history that
prescribes the unity and homogeneity of the nation-state. In the PRC,
national-humiliation discourse is produced in the last refuge of one of the
major institutions of modernity the Chinese Communist Party; but it is
important to note that its Central propaganda Department is now concerned
with promoting nationalist history. National humiliation seems to be a
purely domestic discourse, but its notions of the rightful place of China on
the world stage continually inform Chinese foreign policy in both elite and
popular discussions. Though national humiliation is considered in Western
discussions of Chinese victimization that needs to be overcome for China
to be a responsible member of international society, Chinese sources, on
the other hand, stress how the outside world, particularly the prosperous
West, needs to understand Chinas particular suffering. (Citations omitted)
Id.
360 Frank Langfitt, China, Philippines Face Off Over Remote Islands, available at
http://www.npr.org/2012/05/29/153921020/china-philippines-faceoff-over-remote-islands (last accessed
10 June 2012).
361 Nong Hong, supra note 8, 58.
101
B. Cost and Benefit of a Status Quo
The benefit of a status quo is that States will be able to get the resources in the
WPS area in its entirety and without being compelled to share it with other claimants.
Being able to own such vast amount of resources would not only satisfy the domestic
demand for fuel. The reserves would also create a surplus of resources, which would
greatly fill the State coffers with petrodollars.
The cost of status quo, however, is they have to wait until the situation becomes
suitable for negotiations.
When they start negotiating for a final delimitation
agreement, they will first need to discuss the verity of the claims of China and of the
Philippines whether both States have a proper ground under International Law.362 The
Proponent believes that the proving of claims will not take a short period of time
considering that the claim of China has no basis under international law.363 After this
phase, exchanges of offers shall be done. Lastly, when the Heads are able to agree on
what the terms will be, the final agreement will further require ratification.364
The proponent believes that time is of the essence in the current situation
between the Philippines and China. Therefore, one or both of the States must take
advantage of the current peaceful relations before the situation becomes worse. In other
362 See generally Alciso, supra note 69.
363 Id. Chapter V.
364 PHIL. CONST. ART. VII, 21.
102
words, a provisional and possible solution must be forged to prevent the situation from
escalating. This study suggests that a JDA both embodies this provisional and possible
solution.
C. Cost and Benefit of a JDA
Having a JDA between China and the Philippines will result to a splitting of
benefits. However, even if there is a division in profits, having a domestic source of oil
is still highly beneficial, if the benefit is understood in light of the economic situations
of two major States in the world.
United States still has not fully recovered from the sub-prime mortgage crisis
that caused major US banks to close down. 365
Also, the United Kingdom is
experiencing a number of economic problems like recession, budget deficits,

unemployment and a declining value of its currency.366
365
BBC
News,
The
downturn
in
facts
and
figures,
available
at
http://news.bbc.co.uk/2/hi/business/7073131.stm (last accessed on 10 June 2012); see also Guillermo
Calvo and Rudy Loo-Kung. US recovery: A new Phoenix Miracle. Vox, available at
http://voxeu.org/index.php?q=node/4858 (last accessed on 10 June 2012).
366
BBC
News,
The
downturn
in
facts
and
figures,
http://news.bbc.co.uk/2/hi/business/7734971.stm (last accessed on 10 June 2012).
available
at
103
Asia, on the other hand, remained stable despite the world economic crisis. 367
This implies that investments are more likely to succeed if invested in Asia. 368 Indeed,
there has been a steady increase in foreign investments in the Philippines. 369 And as
investment in Asia increases, energy consumption also increases.370 Without fuel that
can be utilized as energy, investments in the Philippines will be stalled.
Both China and the Philippines will benefit in having an additional supply of oil
and natural gas. However, they cannot tap into these supplies if there can be no
provisional agreement that will govern their joint activity. Doing otherwise will be a
flagrant violation of the UNCLOS, which mandates mutual restraint.371
Article 74, paragraph 3 of the UNCLOS provides that the States with
367 Lesley Wroughton and Glenn Somerville, Asia resilient, has room for stimulus IMFs Singh,
available at http://in.reuters.com/article/2012/01/31/imf-asia-idINDEE80U04520120131 (last accessed
on 10 June 2012).
368 See Puneet Pal Singh, World attention shifts to East Asia amid global slowdown, available at
http://www.bbc.co.uk/news/business-18248215 (last accessed 10 June 2012).
369 See Marianne T. Escanilla, A 2011 Philippine Real Estate Industry Perspective, available at
http://businessmirror.com.ph/home/properties/22551-a-2011-philippine-real-estate-industry-perspective
(last accessed 10 June 2012); see also Czeriza Valencia, Foreign investment pledges 249% to P3.2B in
Feb, available at http://www.abs-cbnnews.com/business/03/18/12/foreign-investment-pledges-rise-249p32-b-feb (last accessed 10 June 2012).
370 BBC, In graphics: Rising Asia, available at http://www.bbc.co.uk/news/world-asia-pacific13746908# (last accessed 10 June 2012).
371 UNCLOS, supra note 36, Art. 74 3
104
overlapping EEZs should, during this transitional period, not to jeopardize or hamper
the reaching of the final agreement.372 Generally, according to the Guyana/Suriname
Arbitration, if a State breaches this duty of mutual restraint, provisional measures under
the UNCLOS, specifically under Article 290, may be resorted to by the injured State. 373
However, in the dispute between China and the Philippines, both States may not resort
to these provisional measures because China does not accept the compulsory
jurisdiction of the ICJ.374 The exception to this unusual situation between China and the
Philippines is to resort to Section 1 of Part XV of the UNCLOS, wherein consent of
both disputing States is not necessary.375
Since the exercise of mutual restraint is mandated, no exploration and
exploitation of the resources within the overlapping area is allowed. Therefore, in order
for both States to utilize the resources within the overlapping area, both States must
first enter into a provisional agreement. An agreement, however, should be started by
an offer and replied by a counter-offer.
372 Id.
373 Guyana-Suriname Arbitration (Guyana/Suriname), Hague Ct. Rep. 446.
374 United Nations Treaty Collection, State parties having accepted the jurisdiction of the Court,
Endnote 1, available at http://treaties.un.org/pages/ViewDetails.aspx?src=IND&mtdsg_no=I4&chapter=1&lang=en (last accessed 19 June 2012).
375 Alciso, supra note 69, 125; citing NATALIE KLEIN, DISPUTE SETTLEMENT IN THE UN CONVENTION
ON THE
LAW OF THE SEA 53 (2005); citing UNCLOS, supra note 36, art. 286.
105
There is no agreement of this kind at the moment between the two countries.
There is also no reported violation of this duty to exercise mutual restraint. The
reported exploration of China is still outside the disputed area. And judging by the
current geo-political situation, the possibility of having a JDA is present if only none of
the two States refuses to negotiate. The proponent placed the brief discussion on the
duty to exercise mutual restraint in order to show that the possibility of non-negotiation
is low primarily because none of the States would want to be sanctioned.
D. Reasonable and Legal Offer
An offer can be generally defined as a document containing provisions, which
the offeror can compromise in order to arrive at a mutual agreement. One of the ways
of filling up the details of an offer is to dovetail differences. 376 To dovetail means, to
fit together into a whole.377 Sebenius said that:
[T]hough many people instinctively seek "common ground" and believe
that "differences divide us," it is often precisely the differences among
negotiators that constitute the raw material for creating value. Each class of
difference has a characteristic type of agreement that makes possible its
conversion into mutual benefit.378 (Underscoring supplied)
377 Merriam-Webster. Dovetail, available at http://www.merriam-webster.com/dictionary/dovetailing

106
He emphasized that by dovetailing the differences, cooperation becomes more
achievable.379 Indeed, the different interests of China and the Philippines, if dovetailed,
can produce a cooperative agreement where both States can benefit. However, both
States must still work within the confines of their own legal framework. This study will
explore on a possible common legal area where both States can legally operate.
1. Difference in the Mining Legal Framework
The Philippines and China follow two different mining regimes.
The
Philippines follow the service contract regime while China follows the concession
regime.
a. Service Contract Regime
In the Philippine Service Contract Regime (SCR), the Contractor provides all
the services and the necessary equipment.380 In this regime, the Contractor assumes all
the risk of exploration.381 If no oil in commercial quantity is discovered, the Philippine
Government is not obliged to reimburse the Contractor of the expenses incurred during
exploration.382
379 Id.
380 Tecson, supra note 65, 166-167; citing The Oil Exploration and Development Act of 1972, 6, 8
(a).
381 Id., 167; The Oil Exploration and Development Act of 1972, 8 (e).
382 The Oil Exploration and Development Act of 1972, 8 (e).
107
The contract is awarded through bidding or, in limited circumstances, through
negotiation between the Philippine Government and the Contractor.383
Once the
contract is awarded, the Contractor is subject to a number of obligations, which are

enumerated in Section 8 of The Oil Exploration and Development Act of 1972. 384
Section 9(a) provides that the Contractor must meet the minimum expenditure
383 Tecson, supra note 65, 166; citing The Oil Exploration and Development Act of 1972, 5; citing
Gabriel L. Villareal & Barbara Anne C. Migallos, Oil Exploration Contracts under P.D. 87, 53 P.L.J. 367,
370 (1978).
384 Id., 167; citing The Oil Exploration and Development Act of 1972, 8. The contractor is obliged
to:
(a) Provide all necessary services and technology;
(b) Provide the requisite financing;
(c) Perform the exploration work obligations and program prescribed in the
agreement between the Government and the Contractor, which may be
more but shall not be less than the obligations prescribed in this act;
(d) Once petroleum in commercial quantity is discovered, operate the field
on behalf of the Government in accordance with accepted good oil field
practices using modern and scientific methods to enable maximum
economic production of petroleum; avoiding hazards to life, health and
property; avoiding pollution of air, land and waters; and pursuant to an
efficient and economic program of operation;
(e) Assume all exploration risks such that if no petroleum in commercial
quantity is discovered and produced, it will not be entitled to
reimbursement;
(f) Furnish the Petroleum Board promptly with geological and other
information, data and reports which it may require;
(g) Maintain detailed technical records and accounts of its operations;
(h) Conform to regulations regarding, among others, safety, demarcation of
agreement acreage and work areas, non-interference with rights of other
petroleum, mineral and natural resources operators;
(i) Maintain all meters and measuring equipment in good order and allow
access to these as well as to the exploration and production sites and
operations to inspectors authorized by the Petroleum Board
(j) Allow examiners of the Bureau of Internal Revenue and other
representatives authorized by the Petroleum Board full access to their
accounts, books and records, for tax and other fiscal purposes; and
(k) Be subject to Philippine income tax.
108
requirement, the amount of which ranges from three Pesos (P 3.00) to eighteen Pesos (P
18.00) per hectare per year.385
If oil in commercial quantity is discovered, the Philippine Government is
obliged to reimburse the contractor the amount it spent to make the extraction possible,
subject to the limitations provided for by law and by the Contract. 386 Section 8 (1)
states that:
[T]he Petroleum Board [now the President or the Department of Energy]
shall
(1) On behalf of the Government, reimburse the Contractor for all
operating expenses not exceeding seventy percent (70%) of the gross
proceeds from production in any year, Provided, that if in any year, the
operating expenses exceed seventy percent (70%) of gross proceeds from
production, then the unrecovered expenses shall be recovered from the
operations of the succeeding years.387
In addition to the reimbursement, the Philippine Government is also obliged to

pay the Service Fee.388 The amount of the Service Fee should not exceed forty per
The Oil Exploration and Development Act of 1972, 8. (Under the 1987 Philippine Constitution, the
President or, under the doctrine of qualified political agency, the Department of Energy replaces the
Petroleum Board.) See Tecson, supra note 65, p.177.
385 The Oil Exploration and Development Act of 1972, 9 (a).
386 Tecson, supra note 65, 167; The Oil Exploration and Development Act of 1972, 8 (1)
387 Id.
388 Tecson, supra note 65, 166; The Oil Exploration and Development Act of 1972, 8 (2).
109
cent of the balance of the gross income after deducting the . . . all operating expenses
recovered pursuant to Section 8 (1) . . . . 389 Additional deductions are enumerated in
Sections 8 (1)(a), namely the amortization and depreciation of intangible exploration
costs.390
Once the exploration contractor discovers oil in commercial quantity exists in
the area licensed to it, it may operate the field on behalf of the Government in
accordance with accepted good oil field practices using modern and scientific methods
to enable maximum economic production of petroleum. 391 No exact guidelines are
provided by The Oil Exploration and Development Act of 1972. The only standard for
the operator is that it complies with the accepted good oil field practices using modern
and scientific methods.392 Later in this study, it will be explained that this is the trend
today as opposed to strict control of the State.
After the oil is extracted from the oil field, the Contractor may market either
domestically or for export all petroleum produced, if authorized in the Contract.393
389 Id.
390 The Oil Exploration and Development Act of 1972, 8 (1) (a)
391 Tecson, supra note 65, 167; The Oil Exploration and Development Act of 1972, 8 (d).
392 The Oil Exploration and Development Act of 1972, 8 (d).
393 Tecson, supra note 65, 167; citing The Oil Exploration and Development Act of 1972, 8.
110
The permissive word may connotes that it is up to the Philippine Government to
determine who will sell the oil extracted.
Consequently, it is the Philippine
Government that has the right of ownership over the oil extracted.
Indeed, the
reimbursement of operating costs and the payment of service fee presupposes that the
ownership over the oil has never been with the Contractor. More importantly, the
language employed by Section 8 (d) is on behalf of the Government. 394 This means
that the Philippine Government did not really divest itself of the ownership over the oil.
Therefore, in the SCR, the ownership of the oil remains with the Philippine
Government. This fact is a key factor in allowing the merge of SCR and the concession
regime (CR).
b. Concession Regime
In the Chinese Concession Regime, the license to explore is first procured by
the Contractor by submitting not only the formal requirements but also by paying the
exploration fees.395 The Chinese Government prescribes fees equivalent to 100 to 500
RMB yuan per square kilometer, which is to be paid annually.396 For every year spent,
394 Tecson, supra note 65, 166; The Oil Exploration and Development Act of 1972, 8 (d).
395 Regulations for Registering to Explore Mineral Resources, Decree No. 240 of State Council of
People's Republic of China, art. 12 (1998). An online reproduction of the said law is available at
http://www.mlr.gov.cn/mlrenglish/laws/200710/t20071011_656306.htm (last accessed 19 June 2012).
396 Id.
111
the exploration fee increases, but in no case will the fee exceeds 500 RMB yuan per
square kilometer.397 The Contractor may also opt to reimburse the Chinese Government
the cost incurred by the latter in its exploration. 398 Moreover, during the course of the
exploration, the Contractor is required to meet the minimum exploration expenditure. 399
Article 17 of the Regulations for Registering to Explore for Mineral Resources Using
the Block System (Chinese Rules on Exploration) stipulates the amount, which varies
for every year of exploration.400
If oil in commercial quantity is found in the area explored, the Contractor
acquires the priority right to mine the area.401 However, a mining license must be
secured.402
Before a mining license is granted, the formal requirements are first
397 Id. (The standard for the exploration fee is applicable to all licenses and [read] as follows: 100
RMB yuan per square kilometer per year for the first three years; 100 RMB yean per square kilometer
shall be added per year starting from the fourth year. However, the highest amount shall not exceed 500
[RMB] yuan per square kilometer per year.)
398 Decree No. 240 of State Council of People's Republic of China, art. 13; In stark contrast, in the
Philippine SCR, it is the Government that is obliged to reimburse the Contractor of the latters operating
costs. The Oil Exploration and Development Act of 1972, 8 (1).
399 Id. art. 17; This regulatory measure is also applied in the Philippine SCR. The Oil Exploration and
Development Act of 1972, 9 (a).
400 Id. (The exploration licensee shall, from the date of issue of the exploration license, meet a
minimum expenditure for exploration according to the following schedule: 1)[]2000 RMB yuan per
square kilometer for the first year of exploration; 2)[]5000 RMB yuan per square kilometer for the
second year of exploration; and 3)[]10000 RMB yuan per square kilometer each year thereafter, starting
with the third year of exploration.) Id.
112
submitted to the Chinese Government. 403 Article 5 of the Regulations for Registering to
Mine Mineral Resources enumerates these requirements.404
After the oil is extracted, the Contractor can rightfully sell it to anyone. 405
Unlike in the SCR, it is implied in CR that the ownership over the oil is transferred to
the Contractor from the moment the mining license is granted. 406 The obvious reason is
no one may rightfully sell something that it does not own or it does not have authority
to sell.
Indeed, the Mineral Resources Law of the Peoples Republic of China
(Chinese MRL) provisions on mining do not indicate that the State owns the oil
extracted.407 From a careful reading of the provisions, the Chinese MRL only limits the
401 Rules for Implementation of the Mineral Resources Law of the Peoples Republic of China, Decree
of State Council of the Peoples Republic of China No. 152, art. 16 (1994). An online reproduction of the
said law is available at http://www.mlr.gov.cn/mlrenglish/laws/200710/t20071012_656322.htm (last
accessed 19 June 2012).
402 Regulations for Registering to Mine Mineral Resources, Decree of State Council of the Peoples
Republic of China No. 241 art. 5 (1998). An online reproduction of the said law is available at
403 Id.
404 Id.
405 Decree of State Council of the Peoples Republic of China No. 152, art. 30 2.
406 KILUANGE TINY, THE JDZ MODEL PSC: A LEGAL ANALYSIS 4.
113
manner of exercising the Contractors granted authority to mine.408 While the Oil
Exploration and Development Act of 1972 expressly stated that the Contractor is an
agent of the Philippine Government,409 no similar provision appears in the Chinese
MRL.
407 Mineral Resources Law of the Peoples Republic of China, Order No. 74 of the President of
Peoples Republic of China, arts. 29-34 (1996). An online reproduction is available at
Arts. 29 to 34 provide:
Article 29 In mining mineral resources, a mining enterprise must adopt
rational mining sequence and methods and proper ore-dressing technique.
The recovery rate and impoverishment rate in mining and recovery rate in
ore-dressing of a mining enterprise shall meet the design requirements.
Article 30 While mining major minerals, its paragenetic and associated
minerals of commercial value shall be comprehensively mined and utilized
in accordance with a unified plan, so as to avoid waste. Effective protective
measures shall be adopted to avoid loss and damage to ores that that cannot
be mined in a comprehensive way or that must be mined simultaneously
but cannot be comprehensively utilized for the time being, and to tailings
containing useful components.
Article 31 In mining mineral resources, it is essential to abide by the state
provisions for the issues regarding labour, safety and hygiene and have the
necessary conditions to ensure safety in production.
Article 32 In mining mineral resources, it is essential to observe the legal
provisions on environmental protection to prevent pollution of the
environment. In mining mineral resources, attention shall be paid to using
land economically. In case cultivated land, grassland or forest land is
damaged owing to mining, the relevant mining enterprise shall take
measures to utilize the lands affected, such as by reclamation, tree and
grass planting, as appropriate to the local conditions. Anyone who, in
mining mineral deposits, causes losses to the production and livelihood of
other persons shall be liable to making compensation and adopt necessary
remedial measures.
Article 33 Before the construction of railways, factories, reservoirs, oil
pipelines, transmission lines and various large structures or architectural
complexes, the units responsible for the construction must obtain
information from departments in charge of geology and mineral resources
under the peoples governments of provinces, autonomous regions, or
municipalities directly under the central government where the units are
114
Article 34 of the Chinese MRL, however, may be read as a provision supporting
Chinese Governments ownership over the extracted oil because of how it was worded.
Article 34 is a provision limiting the rights of the Contractor to sell the mineral
resources.410 It is only a limitation but not a prohibition. It limits the persons who can
purchase the extracted oil411 but if no limitation is provided, the contractor can rightfully
sell the produced oil, subject to taxation and fees. Moreover, this does not abrogate the
ownership of the Contractor over the extracted oil. Indeed, the positive language of
located, about the distribution and mining of mineral resources in the areas
where the construction projects are to be built. Those projects shall not be
constructed over important mineral deposits unless approved by relevant
departments authorized by the State Council.
Article 34 As prescribed by the State Council, mineral products to be
purchased exclusively by designated units may not be purchased by any
other units or individuals; excavators of such minerals shall not sell their
products to non-designated units.
Id.
408 Id.
410 Order No. 74 of the President of Peoples Republic of China, art. 34.
411 Id.
115
Article 30 of the Chinese MRL-IR upholds the Contractors right to sell the extracted
oil, except in cases when the State Council limited this right.412
At the present, the only limitation to the power of the Contractor to sell the
mineral resources is with regard to gold.413 Therefore, in CR, the ownership of the
extracted oil belongs to the Contractor, and not with the Chinese Government. This is
also a key factor in merging SCR and CR.
2. Reconciling the Two Regimes
The proponent is of the position that the two different regimes can operate
simultaneously. As indicated in the previous subsection, the ownership of oil belongs to
the Philippine Government in the SCR. While in the CR, it is with the Contractor.
These facts facilitate the creation of JDA between China and the Philippines.
Attached in this study is a Flow Chart entitled The Flow of Oil Rights in a
Mixed SCR-CR wherein a simulated flow of oil rights is depicted (See Annex A.) The
discussion on how the flow chart can be understood is divided into three parts: first, in
the perspective of China; second, in the perspective of the Philippines; and third the
flow of oil.
412 Decree of State Council of the Peoples Republic of China No. 152, art. 30.
413 Asian Legal Information Institute, Circular of the General Office of the State Council on Banning
Unauthorized Gold Markets and Strengthening Administration of Gold Products, available at
http://www.asianlii.org/cn/legis/cen/laws/cotgootscobugmasaogp1219/ (last accessed 17 June 2012).
116
In the perspective of China, the Contractor receives the exploration and mining
(E&M) rights,414 along with the oil rights,415 in exchange for the E&M fees,416
royalties,417 income tax418 and resource tax.419 (See Annex A.1)
In the perspective of the Philippines, the Contractor, after discovering oil in
commercial quantity and extracting it, returns the oil rights to the Philippines. (See
Annex A.2) It is the proponents belief that although no prior transfer of oil rights from
the Philippine Government to the Contractor occurred, the Contractor has the right to
hold the transfer of oil to the Philippine Government in the event that the latter fails to
pay the former its service fee and reimbursement cost.420 Therefore, it can be said that
414 Decree No. 240 of State Council of People's Republic of China, arts. 12, 16; Decree of State
Council of the Peoples Republic of China No. 241 arts. 9, 13;
415 Chapter V (D)(1)(b).
416 Decree No. 240 of State Council of People's Republic of China, arts. 12, 16; Decree of State
Council of the Peoples Republic of China No. 241 arts. 9, 13;
417 ERNST & YOUNG, GLOBAL OIL AND GAS TAX GUIDE 87-96 (2011)
418 Id.
419 Id.; Order No. 74 of the President of Peoples Republic of China, art. 5; Decree of State Council of
the Peoples Republic of China No. 152, art.31 (3).
117
the Contractor returns the oil rights to the Philippines after reimbursement and payment
of service fee.
If oil in commercial quantity is discovered and extracted, the Philippines shall
reimburse the Contractor of the operating costs, including the amortization and
depreciation of intangible assets.421 The Philippines shall also pay the Contractor the
agreed Service Fee.422 From the amount received by the Contractor, income tax and
excise tax shall be deducted.423
Last but not the least, the process of how the right to oil flows shall be
discussed. (See Annex A) On the face of the flowchart, it appears from the flowchart
that the right to oil originated from China and it was derivatively transferred to the
Philippines. The flowchart is inaccurate in this aspect. The flow of oil rights in the
flowchart is not a showing of from who did the oil rights originated. Technically
420 See An Act to Ordain and Institute the Civil Code of the Philippines [CIVIL CODE], Republic Act.
No. 386, art. 2085 (1950). It is the proponents position that, although there is no separate contract of
pledge that is created between the Philippine Government and the Contractor, the provisions of the The
Oil Exploration and Development Act of 1972 indicates that there can be an implied contract of pledge
created by operation of law. Article 2121 of the Civil Code recognizes that a contract of pledge is created
by operation of law in instances when the lawful owner of the movable object did not reimburse the
possessor in good faith of the necessary and useful expenses incurred by the latter. Id., art. 2121.
421 The Oil Exploration and Development Act of 1972, 8 (1) (a).
422 Id., 8 (2).
423 Tecson, supra note 65, 171; citing La Bugal Blaan Tribal Association, Inc. v. Ramos 445 SCRA 1,
at 223
118
speaking, it is wrong to say that the right to oil came from China and it was transferred
to the Philippines. It is also wrong to say that the Philippines has it exclusively for
itself. The right to oil both belongs to China and the Philippines but the apportionment
of those rights until a final delimitation agreement is created.424
The purpose of showing the flow of oil rights is to show that in the end, if both
States agree to enter into a JDA, they are still going to enjoy what the normally get if
there is no cooperation. In the next subsection, the possible compromises in the full
supervision and control aspect shall be discussed. In the said aspect, States need to
compromise meaning, they must lose some control, but not all, in order to get a portion
of the oil in return.
3. Possible Compromises
In the proposed JDA, States will need to set compromises on their power to
supervise and control and not on the financial aspect. As shown in the flowchart, both
States will still receive the amount of revenues they ordinarily get if there is no existing
JDA. The reason is, in a merge SCR-CR, it is the Contractor who shoulders the burden
by facing two different taxation regimes. 425 Since no significant financial compromise
424 This can be implied from the correlated duty to exercise mutual restraint that prevents States from
appropriating for themselves the resources inside a disputed territory. See UNCLOS, supra note 65, art.
74 3.
425 The issue on how to attract investors is not an issue of law but of business. However, the
proponent posed some suggestions in the conclusion and in Annex 3 namely, to delegate the right to sell
the oil to the contractor, to limit the number of contractors eligible to operate in the overlap in order to
increase the revenues of the Contractor and, to create a tax treaty reducing the corporate income tax from
both States.
119
on the part of the States is present, more focus will be given on reconciling the powers
of both States to supervise and control.
a. Compromises on the Power of Control and Supervision
Full control and supervision does not mean that the Philippine Government
must spend time and resources to actually supervise and control the specific acts of the
Contractor. Both the Philippine law and international law supports this. Full control
and supervision under the Philippine domestic law is to create a legal framework and
ensuring its proper implementation.426 The Philippine Supreme Court held that [t]he
concept of control adopted in Section 2 of Article XII must be taken to mean less than
dictatorial, all-encompassing control; . . . . Control by the State may be on a macro
level, through the establishment of policies, guidelines, regulations, industry standards
and similar measures . . . .427 (Emphasis omitted)
In international law, it means the degree of control where the industry is still
capable of regulating itself.428 Desiree Adams of the UN Development Programme
explains that due to the Exxon Valdez oil spill 1989, the incapacity of the State to fully
426 Tecson, supra note 65, 171; citing La Bugal Blaan Tribal Association, Inc., 445 SCRA at 130-31.
427 Tecson, supra note 65, 171; citing La Bugal Blaan Tribal Association, Inc., 445 SCRA at 130-31.
428 DSIRE ABRAHAMS, REGULATING CORPORATIONS: A RESOURCE GUIDE, 6 (prov. ed. Dec. 2004).
(What emerged in practice centred heavily on industry self-regulation.); cited in ATENEO DE MANILA
SCHOOL OF LAW, MEMORIAL FOR RESPONDENT FOR 2010-11 STETSON MOOT COURT COMPETITION 20,
available at http://www.law.stetson.edu/international/iemcc/media/finals-1131r.pdf (last accessed 19 June
2012) [hereinafter Memorial for Respondent].
120
regulate the oil industry was revealed.429 After the disaster, the concept of industry selfregulation became the popular choice, of the oil companies and the States. 430 Indeed, in
the United States, the Governments role is limited only to approval of licenses and
ensuring that proper implementation of the U.S. laws is done.431
The Proponent is of the opinion that the same interpretation of full control and
supervision is being applied in China. A careful reading of the Chinese Mining Law
reveals that the Chinese Governments power is limited only to the promulgation of
rules and ensuring through inspection that the Contractor complies with the rules. 432
The power to promulgate rules is obviously manifested through the regulations.
Moreover, the power to ensure compliance is being exercised through general
supervision, inspection and imposition of fines and revocation of permits. Therefore, in
the Chinese oil upstream industry, the Governments participation is broad and not
specific. Like the Philippines, China also conforms to industry self-regulation.
It can be understood from the discussions above that under the Philippine laws,
Chinese laws and International law, the control of the States rests mainly in the various
429 ABRAHAMS, supra note 428, 2.
430 Id., at p.2-3.
431 See generally, MEMORIAL
FOR RESPONDENT, supra note 428, 20-21; citing CONGRESSIONAL

RESEARCH SERVICE, DEEPWATER HORIZON OIL SPILL: SELECTED ISSUES FOR CONGRESS 14-16
432 See generally Order No. 74 of the President of Peoples Republic of China.
121
laws that it promulgates. That is, States allow the industry to regulate itself to some
extent.
b. Reconciling the Two Laws: The Assumptions
Since both States operate through their laws, it is possible that States find
themselves in conflict with each other when it comes to exercising their authority to
regulate the activities of the Contractor. To prevent this, a set of rules where both Sates
can operate simultaneously is necessary. To create a so-called Joint Rules otherwise
known as Applicable Law in typical JDAs, it is imperative to study the limitations in
the Philippine and Chinese laws.
For example, both the Philippine and the Chinese laws provide for minimum
exploration expenditure.433 However, the Philippines requires a much lesser amount
than China.
Since the Philippine Law provides that stricter stipulations may be
included in the Contract,434 this study suggests that the proposed JDA adopts the
amounts provided in the Chinese Law. Even though the Contractor could no longer
take advantage of the relatively low minimum exploration expenditure, the goal is to
make the two laws operate together.
To better understand what the Proponent is trying to achieve, a simple
explanation is provided. First, treat the individual legal frameworks as the individual
433 The Oil Exploration and Development Act of 1972, 9 (a); Decree No. 240 of State Council of
People's Republic of China, art. 17.
434 The Oil Exploration and Development Act of 1972, 8 (c).
122
boundaries of States. Consequently, going beyond these individual boundaries will
make the act ineffective.
Second, assume that there is a common area where the two laws of the States
can operate simultaneously without going outside their boundaries. An example of this
is the provisions on the minimum exploration expenditure where in States will not
exceed in their boundaries if the minimum amounts are increased and equalized.
Third, assume also that there are independent acts of the States that do not affect
the other States right to control and supervise. An example of this would be the notice
requirement provided in both laws. In the Philippines, the President must notify the
Congress within thirty (30) days. 435 In China, the licensing authority must notify the
Department for Geology and Natural Resources.436 Although the two provisions are
different, the effects are independent.
Lastly, assume that there are possible conflicting provisions. Some of these
provisions can be resolved by adding Conflict of Laws clause in the JDA.
Conflict of Laws clause is a stipulation in the JDA allowing domestic courts to apply
the provisions in the JDA even though no such law exists under the domestic law. In
other words, the Philippine courts are enforcing the stipulations in the JDA to which the
parties have consented.
435 PHIL. CONST. ART. XII 2.
436 Decree No. 240 of State Council of People's Republic of China, art. 4.
123
Some conflicting provisions, however, cannot be reconciled by a Conflict of
Laws clause. Both the Philippine and Chinese laws are contradictory to each other.
An example of the second type would be the Approval of Permits provision where
both States cannot do away with the function of approving the permits because it would
constitute as an actionable nonfeasance. Consequently, the rejection of State party will
not make the act effective even though the other State party approved it. In this type of
cases, the modes of dispute resolution become very important in re-aligning the
decisions of both States.
c. Comparison of the Laws under SCR-CR
The comparison is made using a table of three columns. The first column
contains the general description of the provision. The second column contains the
Philippine legal provisions culled from The Oil Exploration and Development Act of
1972 and Article XII, Section 2 of the 1987 Constitution. The third column contains the
Chinese mining law provisions provided under the following Chinese laws: (1) Mineral
Resources Law, (2) Rules for Implementation of the Mineral Resources Law, (3)
Regulations for Registering to Explore for Mineral Resources using the Block System,
and (4) Regulations for Registering to Mine Mineral Resources.
Table 1 Comparison of Service Contract Regime (SCR) and Concession Regime (CR)
General Description
Capacity of the
Government to
directly undertake the
exploration and
Philippine Law (SCR)

The Government may directly
undertake the exploration and
mining of oil and natural gas437
437 The Oil Exploration and Development Act of 1972, 4.
Chinese Law (CR)

The Government may directly
undertake, through its Stateowned mining enterprise, the
exploration and mining of oil
124
exploitation
Capacity of the
Contractor
Notice Requirements
The Contractor must be capable of

providing
the
services
and
technology and the financing
needed.439 However, the Contract
may impose stricter stipulations.440
The President must notify the

Philippine Congress within 30 days
from execution of the contract.444
and natural gas.438

The Contractor must have the
following: (1) the necessary
funds, equipment and technical
personnel;441 (2) feasibility
study report, mine design or
mining proposal;442 (3) a mine
chief who is equipped with
basic knowledge regarding the
mining
production,
safety
control
and
environmental
protection.443
Notice for application must be
given to the Department for
Geology
and
Mineral
Resources445
Notice that the mining license is
granted must be published.446
439 The Oil Exploration and Development Act of 1972, 8 (a) and (b).
440 Id., 8 (c).
441 Decree of State Council of the Peoples Republic of China No. 152, art.13.
442 Id.
443 Id.
444 PHIL CONST. ART. XII, 2
445 Decree No. 240 of State Council of People's Republic of China, art. 4
125
4
Bidding
Requirements for
exploration and
mining rights
Minimum
Capitalization
Requirement
Number of Contracts
allowed
Public bidding using a weighted

system of evaluation or through
negotiation
in
exceptional
circumstances447
50 Million U.S. Dollars for every
single mining unit449
Exploration Fees
More than one contract is allowed451

provided that the total area for
every Contractor and its affiliates
does not exceed the maximum area
under Section 18(b).
None
Carry-over of
Yes453
Public bidding448
None; only adequate financial

capacity of the contractor is
required to be shown.450
None.
100 RMB Yuan per sq.km/year

for the first 3 years; 200 RMB
Yuan for the 4th year; 300 RMB
Yuan for the 7th year and the
succeeding years. The fees may
be reduced or condoned by the
State, upon application.452
Yes454
446 Decree of State Council of the Peoples Republic of China No. 241 art. 31.
449 Office of the President, Authorizing the Secretary of Environment and Natural Resources to
Negotiate and Conclude Joint Venture, Co-Production, or Production-Sharing Agreements for the
Exploration, Development and Utilization of Mineral Resources, and Prescribing Guidelines for such
Agreements and those Agreements involving Technical or Financial Assistance by Foreign-owned
Corporations for Large-Scale Exploration, Development, and Utilization of Minerals, Executive Order
No. 279 [E.O. No. 279], 4 (July 25, 1987).
450 Decree No. 240 of State Council of People's Republic of China, art. 5, 22.
126
Amount in Excess of
Minimum
Exploration
Expenditure
Minimum
Exploration
Expenditures
P 300 per square kilometer per year

(sq.km/year) up to P 1,800 per
sq.km/year.455
10
Maximum
Exploration Area
800 sq.km to 15,000 sq. km. for

every
Contractor
and
its
affiliates;457 Subject to liberals
stipulations
allowed
by the
President or the Department.458
11
Change of
No provision under P.D. No. 87 but
2,000 RMB Yuan per sq.km for

the 1st year; 5,000 RMB Yuan
for the 2nd year; 10,000 RMB
RMB Yuan for the succeeding
years.456
Up to 4,050 sq.km for each
exploration project;459 the area
granted to Contractor may be
modified provided the new area
does
not
exceed
the
maximum.460
Approval is necessary462
455 The Oil Exploration and Development Act of 1972, 9 (a)
456 Decree No. 240 of State Council of People's Republic of China, art. 17; Decree of State Council of
the Peoples Republic of China No. 241 art. 13.
457 The Oil Exploration and Development Act of 1972, 18 (b).
458 Id., 10.
459 Decree No. 240 of State Council of People's Republic of China, art. 3 (One (1) basic unit area is
equal one (1) minute longitude by one (1) minute latitude); Philippine Mining Act of 1995, 3 (b) (One
(1) meridional block is minute longitude by minute latitude, which is also equal to 81 hectares).
127
exploration area
12
Period for
Exploration
13
Exclusivity of
Exploration Area
the Contract may impose stricter

stipulations461 and require prior
approval.
7 years, extendible up to 10 years;
but shall not exceed 10 years;463
extension shall only be granted if
the Contractor drills a minimum
footage of test wells during the
validity period of the license;464
subject to the liberal terms allowed
by
the
President
or
the
Department.465
Exclusive
Contractor468
to
Exploration
For oil and petroleum, 7 years;

no limit as to the total number
of years as long as every
extension do not exceed years
and application was made 30
days prior to expiration of
original or extended period;466 if
not made within 30 days, the
Contractor must wait for 90
days before re-applying for a
permit.467
Exclusive
to
Exploration
Contractor469
463 The Oil Exploration and Development Act of 1972, 9 (e).
464 Id., 9 (a).
465 Id., 10.
467 Id., art. 24.
468 The Oil Exploration and Development Act of 1972, 8 (h).
128
14
Approval of
Exploration and
Mining Permits
15
Penalty for not

complying the
Minimum
Exploration
Expenditure
The President himself/herself or the

Department of Energy but with the
final approval of the President;470
however, once the Contract is
approved, the right to explore and
mine are deemed granted with the
Contract.471
[I]t shall pay the Government the
amount it should have spent but it
did not . . . .473
Department in charge of
Geology
and
Mineral
Resources472
Self-correction
within
prescribed period; if still fails to
meet the MEE, the Contractor
must pay a fine not greater than
50,000 RMB Yuan; revocation
of the permit shall be imposed if
the
Contractor
repeatedly
violates the MEE.474
470 PHIL CONST. ART. XII, 2.
471 The Oil Exploration and Development Act of 1972, 9 (f);
the Peoples Republic of China No. 241 art. 3.
129
16
Pro-rating of
Minimum
Exploration
Expenditure
No provision under P.D. No. 87.

However, the Civil Code adheres to
the
principle
of
unjust
enrichment.475
17
Compulsory
Commencement of
Exploration
Experimental Mining
during Exploration
By default, there is no CCE; but the

Contract may impose stricter
stipulations.477
Prior application is not required.
The right to mine is given from the
time the right to explore is granted
under the Contract.479
18
MEE is prorated if delay or

postponement was due to force
majeure or fortuitous event
provided, thea report is filed
within 30 days from resumption
of work.476
Contractor must commence the
work 30 days from issuance of
permit.478
Prior application is required480
475 CIVIL CODE, supra note 420, Art. 22.
479 See The Oil Exploration and Development Act of 1972, 8 (d).
130
19
Reservation of the
right to explore once
oil of commercial
quantity is discovered
Limited only to the delineated area

plus 12 % of the initial area; 481
provided that the Contractor pays
an annual rental fee of not less than
20 Pesos per hectare/year.482
If the Contractor intends to

reserve its existing right to
explore the area, reservation
will be valid for 2 years,
extendible for another 2 years
but the number of extensions is
limited
only
to
two
extensions;483
It shall be reserved if public
interest is served and technical
support is not yet available.484
481 The Oil Exploration and Development Act of 1972, 9 (e)
482 Id.
483 Decree No. 240 of State Council of People's Republic of China, arts. 10, 21.
484 Id., Art. 21
131
20
Abandonment /
Postponement of
Exploration
21
Compulsory
Relinquishment of
initial area for
exploration
Abandonment within the first two

years shall make the Contractor
liable to pay a fine equivalent to the
2 years worth of operating
expenses.486
of the initial area at the end of the
fifth and seventh year;488 not
applicable to delineated production
area;489 subject to liberal terms
allowed by the President or the
Department.490
If the Contractor fails to reserve,

it must wait for 90 days before
applying for another exploration
permit.485
Unjustified postponement of
work for six months of the
Contractor make it liable to pay
a fine or to surrender its
permit.487
None.
485 Id., Art. 22.
489 Id.
490 Id., 10.
132
22
Exclusive Right to
Mine Explored Area
23
Transfer of
Exploration Right
24
Period for Mining
If the Contractor discovers oil in

commercial quantity, it can
delineate the area491 and start the
mining.492
The Contractor must first secure the
approval of the President or the
Department;494 if transfer is
between affiliated companies, the
transfer is automatic.495
Balance of the exploration period

plus
additional
period
not
exceeding 25 years, renewable for a
period not exceeding 15 years is
granted to the Contractor.497
Upon discovery, the Contractor

Contractor must apply for a
permit to mine.493
The Contractor must first secure
approval of the Department;
approval is only granted after
the substantive (e.g. not
prohibited by law, qualifications
of
both
transferor
and
transferee, and appraisal) and
formal
requirements
are
complied; once approved, the
license may be modified.496
Mining shall be for a term not
exceeding 30 years depending
on the scale of the mining; if
large-scale, up to 30 years; if
medium-scale, up to 20 years; if
small-scale, up to 10 years.
Extensions are allowed upon
application.498
491 Id., 9 (d).
492 Id., 8 (d)
493 Decree of State Council of the Peoples Republic of China No. 241 art. 3;
495 Id.
497 The Oil Exploration and Development Act of 1972, 9 (f).
133
25
Fee for Mining

Rights
26
Standards for
granting Mining
Permit
27
Change in the mining

area

However, the Contractor is obliged
to operate the field on behalf of
the Government in accordance with
accepted good oil field practices
using modern and scientific
methods to enable maximum
economic production of petroleum;
avoiding hazards to life, health and
property; avoiding pollution of air,
land and waters; and pursuant to an
efficient and economic program of
operation.501
Moreover,
the
Contract may also impose stricter
stipulations.502
stipulations.504
1,000 RMB Yuan per sq.

km./year499 The fees may be
reduced or condoned by the
State, upon application.500
The Contractor must submit
documentary proof of its
capacity
along
with
a
development plan and other
formal requirements required by
the department.503
The change must be approved

and the application must be
submitted within the validity
period of the mining permit505
499 Id., art. 9.
500 Id., art. 12
502 Id., 8 (c).
134
28
Applicable Taxes
Excise Tax,506 Corporate Income

Tax,507
Royalties,508
Mineral Resource tax,509
Mineral
Resource
Compensation,510 and Corporate
Income Tax511
506 Tecson, supra note 65, 244; National Internal Revenue Code [NIRC], Republic Act No. 8424,
151 4. (15% of the fair international market price).
507 ERNST & YOUNG, supra note 417, 342.
508 Id. 88-89.
509 Order No. 74 of the President of Peoples Republic of China, art. 4; ERNST & YOUNG, supra note
417, 89-90.
511 ERNST & YOUNG, supra note 417, 90-91.
135
29
Exemption from
Tariff and Custom
Duties
30
Reimbursement of
Governments
Investment
31
Reimbursement of
Contractors
operating expenses
and Payment of
Service Fee
On importation of machinery and

equipment
and
spare
parts,
provided: (1) machinery of same
price and quality is not available in
the Philippines, (2) directly,
actually and exclusively used for
the operation, (3) prior approval of
the Department, (4) imported
capital shall not be sold.512
Allowed;
Reimbursement
of
operating costs is subject to cost
recovery limitation provided in the
Contract;516 but the Contract must
conform with the cost recovery
limit provided by law a maximum
of 70% of the gross proceeds shall
be paid to the Contractor as
reimbursement
of
operating
expenses; the unrecovered amount
shall be carried over to the
succeeding years.517
Eligible to exemption
subject to approval513
Equivalent to the States Actual

Investment as appraised by the
organizations designated.514 The
fees may be reduced or
condoned by the State, upon
application.515
None.
513 ERNST & YOUNG, supra note 417, 94.
515 Id., Art. 15
516 The Oil Exploration and Development Act of 1972, 10-A (a).
517 Id., 8 (1).
but
136
32
33
34
Exportation of Crude
Oil
Sale and Disposal of
Natural Gas and
Casinghead
Petroleum Spirit
Closing down of a
Mining Area
Service fee is paid by the

Government the amount of which is
equivalent to gross income after
deducting operating expenses.
Allowed provided, a portion will
remain to cater domestic needs518
Must conform with the rules
prescribed for crude oil;520 however,
the market price shall be the tax
base;521 provided further, that that
prospective
demand
in
the
Philippines are first satisfied.522
No specific provision but approval
before closing may be considered
as required under accepted good
oil field practices.524
Allowed; there is no prohibition

on exporting oil extracted519
The Contractor is allowed to
export minerals it extracted,523
including the oil and natural gas
produced.
The Department must approve
the closing down of the mine.525
The Contractor must submit a
geological report and, after
closing down the mine, submit
another report about the closing
down.526
518 Id., 12 (e)
520 The Oil Exploration and Development Act of 1972, 5 (i).
521 Id., 9 (i) (1).
522 Id., 9 (i) (2).
525 Decree of State Council of the Peoples Republic of China No. 152,, art. 32.
137
35
Government
Inspection
and Submission of
Records & Accounts
Contractor
must
grant
the
inspectors access to equipment area
and, exploration and production
sites527 and allow full access to
their
accounts,
books
and
records528
36
Confidentiality of the
results of
investigation
Full Disclosure of
Interest in the
Contractor
Effect of Fortuitous
Event
Yes; access is only limited only for

tax and fiscal purposes531
37
38
Domestic mining and petroleum

companies
interest
in
the
Contractor must be disclosed.533
None under PD 87 but under the
New Civil Code, when the obligor
is prevented by a fortuitous event in
doing the act required of him, it
If the Department intends to

inspect the work or verify issues
with regard to capitalization, the
Contractor must report to the
Government and must submit to
inspection529
Refusal shall
warrant the application of a
fine.530
Results of the investigation shall
be confidential532
None.
Justifies pro-rating of Minimum
Exploration
Expenditure,535
reduction of mining fee and
reimbursement fee536
526 Id.
527 The Oil Exploration and Development Act of 1972, 8 (i).
528 Id., 8 (j).
the Peoples Republic of China No. 241, art. 14.
531 The Oil Exploration and Development Act of 1972, 8 (j).
138
39
Insurance against
Fortuitous Event
40
Performance Bond
41
Termination of
Contract
Rescission
42
shall be released from such

obligation, in whole or in part.534
stipulations.537
Contractor shall post a bond or
guarantee of sufficient amount.539
Upon expiration of the period.
Contractors are required to have

an insurer for civil liabilities
arising from pollution;538
None.
Upon expiration of the period540
upon
rescission
of
the
Contractor for any reason after
submission of a completion or
termination report541
534 CIVIL CODE, supra note 420, Art. 1266.
536 Decree of State Council of the Peoples Republic of China No. 241 art. 12
538 Regulations of the Peoples Republic of China Concerning Environmental Protection in Offshore
Oil Exploration and Exploitation, Decree No. 253 of the State Council of the Peoples Republic of China,
Art. 9 (1998).
541 Id. Rescission may only be done by one of the parties when the exploration and/or mining work is
impossible due to causes that is not attributable to the parties. Otherwise, there would be unjustified
termination that would fall under the category of abandonment. Tecson, supra note 65, p. 216.
139
43
Mode of Dispute
Resolution
Generally accepted
arbitration practice542
international
44
Employment of
Nationals of the State
Parties
Filipinos are given preference to

positions for which they have
adequate training; training program
must be adopted;544 incentives are
granted;545
Consultation by the parties

involved; if not effective,
adjudication543
No specific provision; only a
general
non-mandatory
provision which States that
State
shall
give
due
consideration to [t]he interests
of those areas and make
arrangements favorable to the . .
. livelihood of the local minority
nationalities.546
d. Classification of the Provisions

The Table in this subsection (Table 2) classifies the provisions provided in the
comparison above. Its purpose is to show the critical stipulations in the JDA. It has
four columns, each containing specific provisions found in the table of comparison
before this subsection.
Those under the Unrestrained Unified Application are stipulations where both
the Philippine and Chinese laws can be fully applied.
Stipulations under the
Restrained Unified Application require that one of the two laws be exercised not in
544 Id., 12 (f), 31.
545 Id., 28.
140
its full effect. For example, the Philippine law regarding the maximum exploration area
is 15,000 square Kilometers while under the Chinese law, it is only 4,050 square
kilometers.547 Since the stipulation as to the size of the exploration area is more liberal
under the Philippine law, a restrictive application is required to match the stipulations
under the Chinese law.
Furthermore, the stipulations under the Reconcile under a Conflicts clause are
basically provisions that do not find a counter-provision with other jurisdiction. In
order for these provisions to have a force and effect in the other jurisdiction, a Conflict
of Laws clause is required. Using this clause, the provision, although absent in one of
the laws, will be applied as a stipulation and not as a legal provision.
Lastly, the provisions under the Concurrent Application require that both States
must have the same decision in order for the provision to apply. This implies that when
the supposed action of the Joint Authority involves any of the provisions under the
fourth column, the consent of both States shall not be presumed, even if the State is
notified.548
Table 2 Analysis of the Provisions under SCR and CR
547 The Oil Exploration and Development Act of 1972, 18 (b); Decree No. 240 of State Council of
People's Republic of China, art. 3
548 In all other instances, the power of the Heads of States to veto the decision or promulgation of the
Authority preserves the power of the States to exercise full control and supervision. In case of
disagreement between the two States, modes of dispute resolution must be resorted.
141
Unrestrained Unified
Application
2
Capacity of the
Contractor
Number of
Contracts
allowed
Carry-over of
Amount in
Excess of the
Minimum
Exploration
Expenditure
Exclusivity of
Exploration Area
13
Restrained Unified
Application
4
Bidding
Requirements
for exploration
and mining
rights
10 Maximum
Exploration Area
Reconcile under a
Conflicts clause
5
Minimum
Capitalization
Requirement
Concurrent
Application
11 Change of
exploration
area
Exploration Fees
14
Minimum
Exploration
Expenditures
20
Abandonment /
Postponement of
Exploration
15
12
Period for
Exploration
21
18
Reservation of
the right to
explore once oil
of commercial
quantity is
discovered
Period for
Mining
22
Compulsory
Relinquishment of
initial area for
exploration
Exclusive Right to
Mine Explored
Area
25
Fee for Mining

Rights
27
Change in the
mining area
Exemption
from Tariff
and Custom
Duties
Closing
down of a
Mining Area
16
Pro-rating of
Minimum
Exploration
Expenditure
19
17
Compulsory
Commencement
of Exploration
Standards for
granting Mining
Permit
24
32
Exportation of
Crude Oil
28
Applicable Taxes
29
Government
Inspection
and Submission
of Records &
Accounts
Confidentiality
of the results of
investigation
33
Sale and
Disposal of
Natural Gas and
Casinghead
Petroleum Spirit
30
Reimbursement of
Governments
Investment
34
31
26
35
36
38
Effect of
Fortuitous Event
37
39
Insurance
against
Fortuitous Event
Termination of
40
Reimbursement of
Contractors
operating expenses
and Payment of
Service Fee
Full Disclosure of
Interest in the
Contractor
Performance Bond
42
Rescission
41
23
Approval of
Exploration
and Mining
Permits
Penalty for
not
complying
the Minimum
Exploration
Expenditure
Experimental
Mining
during
Exploration
Transfer of
Exploration
Right
142
44
Contract
Employment of
Nationals of the
State Parties
43
Mode of Dispute
Resolution
The classification of provisions in Table 2 finds their relevance in the

recommended JDA attached in this study as Annex 3. Some provisions under the laws
of both the Philippines and China cannot be applied directly and without adjustments.
Adjustments are necessary to allow the concurrent or unified application of both laws
as if only one law-making authority promulgated them.
No adjustments are necessary for the provisions classified under Unrestrained
Unified Application since both laws allow their application.
The adjustments
warranted by the provisions classified under the column of Restrained Unified

Application are already made. For example, the maximum exploration area is set to
4,050 square kilometers in the proposed JDA in order to satisfy the maximum area
requirements of both laws.
A Conflicts of Laws clause is also stipulated to grant the courts of both States
the jurisdiction to penalize acts which are not prohibited under their respective national
laws.
As for the provisions classified as Concurrent Application, an additional
requirement stating that [o]nly the Heads of States may approve the proposed closing
down of a mining area was added in the relevant provisions of the proposed JDA.
143
VI.
CONCLUSION AND RECOMMENDATION

Although there is no duty to conclude a JDA under International Law, the duty
to negotiate in good faith, which is embodied in the UNCLOS, can compel States to
enter into a JDA if the States can operate without too much injury.
The duty to conclude a JDA when States have overlapping EEZs is not the same
as the duty to negotiate the same. The duty to conclude requires States to enter into a
provisional agreement like a JDA. This duty, although supported by William Onorato,
does not find support under international law.
Among the sources of international law that can bind a State, only the existence
of an international customary law (Custom) can possibly support the position of
Onorato.
Existence of treaties and conventions can be verified through objective
search. The nearest existing convention that can support Onoratos proposition is the
UNCLOS. However, the provisions of UNCLOS do not support the conclusion of
JDAs over petroleum resources.
As for the treaties, bilateral treaties between and among the North Sea States
(e.g. Germany, Denmark, the Netherlands), and related European States (e.g. United
Kingdom, Ireland, and Norway) were cited by Onorato to support his position. 549
Although these treaties can evince State Practice, without opinio juris, they cannot bind
other States.
549 See Chapter III (A) (5).
144
On the other hand, general principles of law (GPL) needs to satisfy the twopronged test proposed by Bin Cheng, before a rule can be considered as a GPL. For
obvious reasons, the rule, which is States must conclude a JDA, cannot be considered a
principle. Moreover, Onoratos proposition that civilized nations adopted the rule does
not find support in international law.550 At best, they will remain to be part of the
domestic laws of some of the North Sea States.
There is also no custom requiring States to conclude a JDA when there is an
overlapping claim. The Committee on Formation of Customary (General) International
Law (Committee) believes that State practice is enough to evince a custom if there
are no indications that opinio non juris (literally means non-belief) exists.551
Otherwise, opinio juris must be proven.552 Ong refuted the proposition of Onorato that
there is a body of international law supporting the existence of opinio juris. Ongs
approach served two purposes: first, to prove that opinio non juris exist; and second, to
disprove the existence of opinio juris. Hence, without opinio juris, there can be no
custom requiring States to conclude a JDA.
The examination of the possible sources of International Law supporting the
conclusion of a JDA is still debatable. In contrast, the duty to negotiate in good faith is
550 See Ongs Opinion, Chapter III (A) (5).
551 See Chapter III (A) (3) (a).
552 See Chapter III (A) (3).
145
clearly expressed in Article 74, paragraph 3 and in Article 83, paragraph 3 of the
UNCLOS. Fortunately or unfortunately, there is a void in the law. Even though the ICJ
in two cases the Gulf of Maine case and the North Sea Continental Shelf cases
recognized that this is a duty of States, no standards were given to determine when is a
negotiation considered as done in good faith.
An obligation without teeth is no
obligation at all. In order to clear the void in the law, a proper interpretation of
negotiation in good faith must be done. The VCLT provides that generally, it is the
States that does the interpretation.
However, other authorities, like the courts
domestic and international and experts may do the interpretations as well. Since the
ICJ did not provide clear standards on how negotiation in good faith is done, resort to
interpretations of the domestic courts and opinion of experts in the field of negotiation
is warranted.
The domestic courts of United States and the Philippines share the same view
as to how good faith is exercised in negotiation. Both held that to negotiate in good
faith means to make proposals and to answer these proposals with counter-proposals.
As for the contents of these proposals, opinions of experts ONeill and Sebenius
opines that terms must be possible to the proponent and reasonable to accept by the
recipient. In sum, an evaluation of the benefits of status quo and cooperation must be
made. If the benefits of cooperation are greater than the benefits of status quo, the State
must choose cooperation. If States choose to cooperate with each other, the terms must
be possible and reasonable.
146
Therefore, the basic definition of negotiation in good faith is to take
compromises whenever there risk of harm or injury is nil or low. In the realm of States,
a compromise must be made within their legal framework. Otherwise, the act shall be
void. To determine the zone where States can compromise, an examination of the
legal framework of China and the Philippines was done. The two tables in Chapter V
shows this zone of possible compromise.
In general, China follows the Concession Regime, if the Contractor is a Chinese
National. On the other hand, the Philippines follows the Service Contract Regime, if
the Contractor is a foreign-owned Corporation.
These two regimes can work
simultaneously. The key to merging these regimes is the ownership of oil rights. In the
former, the right to the oil transfers from the State to the Contractor. In the latter, the
right stays with the State. Hence, in order for the merger to work, the Contractor must
agree that it shall not have any rights over the oil produced.
However, the States are not the only players in this oil upstream industry. The
Contractor must also agree to the stipulations offered by the States. Indeed, the set-up
transfers all burden to the Contractor. Not only will the Contractor pay two State taxes.
It will also lose the right to oil, which it normally acquires under the Concession
Regime. Therefore, to convince the Contractor to invest, future tax treaties and valueadded provisions (e.g. limitation on the number of Contractors) must be agreed to by
both States. More importantly, the Philippines must agree to a stipulation that the
Contractor can sell a portion of the oil produced.
147
The stipulation that the Contractor may sell the oil serves dual purpose. First, a
portion of the oil produced will go to China, and the other portion will go the
Philippines. Second, the revenues produced from selling the oil will go to the
Philippines, which can be revolved back to the funds needed to pay the Service fee of
the Contractor. In the end, the Philippines and China will get to extract oil from the
disputed area without losing the revenues they normally get in oil exploration. As for
the Contractor, it will be reimbursed from its investment and be paid a considerable
profit. Additional profits may also be derived from the authority to sell the oil, which
can be granted by the Philippine Government.
Last but not the least, the specific provisions of two mining legal framework shall be
examined in order to determine the stipulations of a possible JDA. If the individual
laws of the States are the legal limits to their authorities, the JDA shall serve as the
secondary limits specifically designed for the overlapping area only. Meaning, the JDA
shall only apply within the confines of the Delta sea. Consequently, outside the Delta
sea, the individual laws of the States shall apply. In arriving at those proposed, two
steps were made by the proponent. First, the laws between China and the Philippines
were compared and classified.553 Second, the provisions and its counterpart provision
were basically further classified whether the provisions may be applied as one provision
553 See Table 1.
148
or not. 554 The end product of the two-step process is the proposed JDA found in Annex
C.
As a way of conclusion, this study believes that the good faith aspect in the duty to
negotiate a JDA should not be taken lightly. Although there is no duty to conclude a
JDA and only a duty to negotiate a JDA is mandated under international law, the good
faith requirement of the duty to negotiate compels States to enter into a JDA if
cooperation between them is possible without great risk or injury. In the plane where
States operate, cooperation is possible when the legal frameworks of both States are fit
to operate simultaneously.
In other words, if no substantial change in the legal
framework is necessary and the only thing required of them is to consent to

cooperation, the proponent believes that they must give their consent. The reason is it
cannot be gainsaid that States will be negotiating in bad faith if they do not enter into a
JDA, where cooperation between States is possible.
554 See Table 2.

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1

The JMSU and the Baseline Law

7 Petro.in, Technology & Process, available at http://www.petro.in/ic/tp/tp.html (last accessed 15 Jun

18 Aurea Calica. Brady expected to breakthroughs in negotiations with China, available at

22 See FORUM ENERGY PLC, ANNUAL REPORTS & ACCOUNTS 2.

A back channel has been defined as a secret,

unofficial, or irregular means of communication.25 Senator Trillanes justified his

25 Merriam-Webster, Back channel available at http://www.merriam-webster.com/dictionary/back

26 Cabacungan, supra note 24.

If Chen Jies perception is to be adopted, Chinas aggression is only a rational

RIGHTS (AND WRONGS) OF

35 See Chapter II (B) (3).

CAPTURE: INTERNATIONAL LAW AND THE

SECURITY BULLETIN 79, at 85 (Autumn 1999).

38 William T. Onorato. Apportionment of an International Common Petroleum Deposit. 26 (2) THE

Bell further explained that a peace agreement in accordance with lex

40 See Chapter IV (A) (1).

41 CHRISTINE BELL, ON THE LAW OF PEACE: PEACE AGREEMENTS

LEX PACIFICATORIA 293.

Consequently, it would be inappropriate to strictly apply the

49 UNCLOS, supra note 36 Article 74 3, 83 3.

Good faith as a standard for negotiation has found its

A JDA is a form of a provisional

Central Intelligence Agency, East & Southeast Asia: Philippines, available at

55 Yusuf, infra note 85.

A limited scope will better show the

function of a JDA as an instrument of peace and economic betterment.

56 See Chapter II (B) and IV (A).

58 GOVERNMENT DU QUEBEC, STRATEGIC ENVIRONMENTAL ASSESSMENT OF OIL AND NATURAL GAS

63 See Chapter II (C) (2).

64 See Nigeria JDA, infra note 265, Footnote 85.

70 Nguyen Hong Thao, supra note 37, at 79.

71 UNCLOS, supra note 36, arts. 74 3, 83 3.

It shall be shown that both experts

72 Onorato, supra note 38.

73 See Chapter III.

It must also conform to the legal mining

JDA AS AN EMERGING CONCEPT IN INTERNATIONAL LAW

[t]he consent of a State to be bound by a treaty may be expressed by signature,

76 Id., at Art. 26.

77 PHIL. CONST. ART. VII, 21.

81 Alciso, supra note 69, p.59.

83 Id., Annex 10.

84 UNCLOS, supra note 36, arts. 74 3, 83 3.

88 UNCLOS, supra note 36, Art. 743, 833.

89 MALCOLM SHAW. INTERNATIONAL LAW. 196 (6th ed. 2008).

David Ong defines joint development as a generic term given to

92 UNCLOS, supra note 36, Art. 743, 833.

94 Yusuf, supra note 85, 131.

Lastly, Miyoshi defines it as an inter-governmental arrangement of a

WITHIN OFFSHORE JOINT DEVELOPMENT AGREEMENTS, in EXPLOITATION OF NATURAL RESOURCES IN THE

98 Chapter II (B) (3).

99 UNCLOS, supra note 36, Art. 733.

102 PETER CAMERON

AND RICHARD NOWINSKI. JOINT DEVELOPMENT AGREEMENTS: LEGAL

105 Miyoshi, supra note 96, p. 27.

107 Miyoshi, supra note 96, p.28.

In a subzone, there are two or more

109 DAVID M. ONG. IMPLICATIONS

OF RECENT SOUTHEAST ASIAN STATE PRACTICE

117 CAMERON & NOWINSKI, supra note 102.

119 Bastida, supra note 111, 402.

INTERNATIONAL OBLIGATION TO CONCLUDE A JDA