The Dragon (China) is inviting private investment to build structures on islands it "controls" in the disputed South China Seas. This year the Dragon is starting regular flights to at least one of these islands. We remind our visitors that adversely occupying (squatting) does not convey title and soverignity when it comes to internationally disputed islands. Neither does military occupation. This latest move by the Dragon infuriates the Dragon's neighbors who have quite legitimate claims to these same islands under the United Nations Law of the Sea Convention (UNCLOS) , the applicable, codified international law that China is signatory to but doesn't follow now that it is inconvenient. It is said that the Philippines, Brunei, Vietnam, Malaysia, and Taiwan have "overlapping claims on the same islands. That is frankly an over simplification in favor of the Dragon. The Philippines, Brunei, Vietnam, Malaysia and Taiwan have overlapping and unsettled claims over certain of the islands which are located within the normally defined exclusive economic zones (EEZ) of two or more nations. These "fuzzy areas around the margins of the usual 200 mile EEZ are to be arbitrated under the UNCLOS articles between the contending neighbors. China however illegally claims virtually the entire South China Sea nearly to the beach line of the main Philippine Islands.
We would strictly warn investors to stay away from any South China Sea investments in disputed areas and islands, even if China has an air strip and hotel there. If an area is outside of 200 miles from the Chinese mainland, and within 200 miles of the other nations disputing the boundaries of their EEZ , you could be left holding the bag. China has zero chance of winning these territories in an international legal tribunal, their attempts at establishing "effective administration" , even "effective settlement ", will not enhance their legal claims and attempts to hold these islands by force will be met with force once the other claimants sort out their conflicting claims and the title to the islands is made clear by an international tribunal. Private interests such as oil companies, and commercial fishing organizations, and expedition tourism companies that cooperate and invest with the Chinese will be dimly viewed by the rightful owners when this all sorts out. Such companies may be forever blocked from participation in south China Seas Projects. Moreover, if things come to blows, regardless of who wins, your investment may be physically destroyed and your insurance voided by the typical "war clause".
The United States has criticized Beijing's building of artificial islands in the disputed Spratly archipelago, and has conducted sea and air patrols near them. The Philippines is suing China in the Hague, while China is refusing to respond, the Hague has already ruled that it has jurisdiction, formal counter argument by China not with standing. China and Vietnam came to a contest of arms over the Paracels in 1974, Vietnam lost about 64 sailors in that contest but still doesn't cede the territory. According to the UN charter, territory acquired by armed conquest does not change title or soverignity. In short any investor backing the Dragon beyond the Dragon's own internationally recognized EEZ boundaries is accepting what should be unacceptable risk normally associated with sound business practice. Our advice is deal with the Dragon, if you must, but only in its own house or your own. Frankly, we'd avoid all reptilian contact whatsoever.