The arbitration concerned the role of historic rights and the source of maritime entitlements in the South China Sea. Philippines summons China envoy over standoff, dares Beijing to seek arbitration.How has the UNCLOS Annex VII arbitration ruling between Philippines v. China affected the disputes in the South China Sea? Background of the Case. Each party files observations on the other party's submission on costs. 62. Hela Schwarz GmbH v. China vowed Wednesday to protect its sovereignty over the South China Sea and said it had the right to set up an air defense zone.