Do 2,000 years of so-called \u201chistorical rights\u201d over large swathes of the South China Sea\u2014China has claimed that in a white paper\u2014supersede current geo-political realities? The Permanent Court of Arbitration in The Hague, Netherlands, has ruled against China and in favour of the Philippines, a long-time US ally, saying that there is no legal basis for China enforcing exclusive control over the resource-rich strategic waterway through which $5 trillion of global trade is carried out every year. China has refused to honour the ruling. By unilaterally initiating arbitration over territorial disputes, China says, the Philippines violated its right to choose means of dispute settlement of its own will as a State Party to the United Nations Convention on the Law of the Sea. At the same time, China has been building islands in the region and enforcing territorial control over portions of the sea around them. China\u2019s stand weakens the principle of dispute resolution through arbitration\u2014but this time, it is far more dangerous, as this is not just a dispute between the two nations, but also a proxy for China-US jousting. The US, with its \u2018pivot to Asia\u2019 policy, can ill-afford to let China control the trade route\u2014it has thus welcomed the ruling and asked for it to be treated as \u2018final and binding\u2019. While the Chinese response, in an optimistic scenario, could be passively ignoring the ruling, less desirable would be the country declaring the region an Air Defence Identification Zone, which will mean it will go for complete militarisation of the area. The US, on the other hand, can respond to China\u2019s belligerence with trade sanctions and even egg on the Philippines to take the matter to the International Court of Justice. In the end, it\u2019s not in the interest of free-trade to have one or the other country establishing its control over a vital trade link.