A United Nations court in the Hague today ruled in favor of the Philippines in a case that nation brought against China over claims in the South China Sea.

China claims exclusive territorial rights over most of the area as defined by the so-called nine-dash line that the Chinese draw on maps to delineate their claims.

The Permanent Court of Arbitration in The Hague said there was no legal basis for China to claim historic rights to resources within the areas claimed.

China boycotted the hearings and, within hours of the verdict, announced that its rejection of the court’s decision. This despite the fact that the UN Convention on the Law of the Sea (UNCLOS), which China has signed, provides for a compulsory dispute settlement process.

The dispute includes implications for freedom of navigation and overflight in the region. An estimated $5 trillion in cargo passes through the South China Sea every year by ship.

Brunei, Malaysia, the Philippines, Taiwan, and Vietnam have all also articulated claims to parts of the area in dispute.

The dispute at one point led to a standoff between Philippine marines and Chinese naval and law enforcement vessels. A Chinese blockade prevented the resupply of the marines stationed aboard the BRP Sierra Madre at Second Thomas Shoal. Eventually a Philippine civilian ship carrying international and domestic journalists ran the blockade and the Chinese ships backed off.

“The decision today is an important contribution to the shared goal of a peaceful resolution to disputes in the South China Sea,” said State Department spokesperson John Kirby in a statement. The United States has not weighed in on the merits of the case.

The tribunal concluded that China lacked historic rights to resources in the waters of the South China Sea. Its claims were incompatible with the exclusive economic zones provided for in UNCLOS.

The tribunal also found that the disputed Spratly Islands were outside of China’s territorial domain and that historically they were used by groups of fishermen of several nationalities and that several Japanese fishing and mining enterprises were attempted there. The tribunal concluded that none of the Spratly Islands is capable of generating extended maritime zones, individually or collectively.

The tribunal also found that China had violated the Philippines’ sovereign rights in its exclusive economic zone in the South China Sea. China interfered with Philippine fishing and petroleum exploration, the court concluded, constructed artificial islands, and failed to prevent Chinese fishermen from fishing in the zone.

The tribunal also concluded that many of the China’s activities in the area harmed the marine environment in violation of the treaty.

Although China rejected the verdict as a legal matter, observers note that there may be some room for a political accommodation. The Philippines government has offered negotiations on de-escalation and resource sharing.

On the other hand, Beijing may feel compelled to show backbone and refuse to be accommodating and perhaps even escalate the disputes. That strategy might deter other countries like Vietnam and Indonesia from pressing their claims in the South China Sea.