Joint development vs cooperation arrangement

On the website of China’s Ministry of Foreign Affairs, one finds this definition of China’s concept of joint development: “The concept of ‘setting aside dispute and pursuing joint development’ has the following four elements: 1. The sovereignty of the territories concerned belongs to China. xxx.” China has offered this concept of joint development to maritime areas within the exclusive economic zones of Asean coastal states falling within China’s nine-dash line. No Asean coastal state, however, has accepted China’s offer of joint development. To accept China’s offer is to concede sovereign rights to China over the overlapping maritime areas.

Under China’s concept of joint development, China has either sovereignty or sovereign rights over the area covered by the joint development. Naturally, our lawyers in the arbitration at the The Hague avoided any discussion on joint development because China has appropriated that term and given it a particular meaning. More importantly, in maritime disputes between states, joint development is resorted to by the parties in case of overlapping exclusive economic zones. The Philippine position, however, is that there are no overlapping exclusive economic zones between the Philippines and China. To concede such overlapping exclusive economic zones would automatically mean the dismissal of the arbitration case because China in 2006 opted out of compulsory arbitration in case of overlapping maritime zones. If there is any overlapping exclusive economic zones between the Philippines and China, the arbitral tribunal would have no jurisdiction to hear our arbitration case.

Sometime in 2018, China proposed to the Philippines joint development on oil and gas in maritime areas in the West Philippine Sea falling within China’s nine-dash line. Of course, we could not accept such proposal because China’s nine-dash line had already been invalidated in the landmark 12 July 2016 Arbitral Award, which recognized that the Philippines has a full exclusive economic zone in the West Philippine Sea unimpaired by China’s nine-dash line. However, Foreign Affairs Secretary Teodoro Locsin, Jr. wisely took this as an opportunity to make a brilliant counter-offer. Secretary Locsin sent back to the Chinese his own draft of a “cooperation arrangement” on exploiting oil and gas in the West Philippine Sea. Secretary Locsin’s draft made no reference whatsoever to “joint development.”

Under Secretary Locsin’s draft, “the two governments have decided to negotiate on an accelerated basis arrangements to facilitate oil and gas exploration and exploitation in relevant maritime areas consistent with applicable rules of international law (hereinafter referred to as ‘the cooperation arrangements’).”

Crucially, Secretary Locsin’s draft further stated: “China authorizes China Offshore Oil Corporation (CNOOC) as the Chinese enterprise for each Working group. The Philippines will authorize the enterprise(s) that has/have entered into a service contract with the Philippines with respect to the applicable working area xxx.” In short, the state-owned CNOOC will enter into an arrangement with a Philippine service contractor, either as a subcontractor or equity partner, or both. These two provisions in Secretary Locsin’s draft were accepted by China in the Memorandum of Understanding (MOU) signed on Nov. 27, 2018. The MOU never mentions the term “joint development.”

The first whereas clause of every service contract awarded by the Philippine government states that the oil and gas belong to the Philippines. Another provision states that Philippine law will govern the service contract. These two critical provisions establish firmly that the Philippines has sovereign rights over the maritime areas covered by the “cooperation arrangements.” China’s signature to the MOU is acceptance of Philippine sovereign rights over the West Philippine Sea. That is why I strongly supported the MOU.

However, the MOU can only be implemented if CNOOC signs a cooperation arrangement with a Philippine service contractor. CNOOC has refused to sign unless the two mentioned critical provisions in our service contracts are deleted. Of course, Secretary Locsin will never budge on these two critical provisions. To give up these two provisions, or even one of them, is to give up our sovereign rights in the West Philippine Sea.

“Cooperation arrangement” is a Philippine concept that the Philippines has the sovereign rights to the oil and gas. “Joint development” is a Chinese concept that China has the sovereign rights to the oil and gas. The MOU is a cooperation arrangement, not a joint development. Every Filipino must know the difference between these two opposing concepts.

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