The South China Sea is a maritime space where States have overlapping claims and unsettled maritime boundaries. While driven by territorial competition for ownership of some of the islands, the core contradictions are more related to freedom of navigation. This sea is one of the world’s most important shipping, trade and energy routes, a rich potential source of sub-sea oil and gas and a major fisheries area. The Republic of the Philippines v The People’s Republic of China Arbitral Tribunal Decision of 12 July 20161 (the arbitral ruling) under the United Nations Convention for the Law of the Sea 1982 heightened the tensions in the area but they had previously been long standing and it merely escalated the concern that the tensions would impede or even halt regional and global commerce. This article focuses on the importance of the South China Sea and argues that if the South China Sea issue is not handled properly, it would be damaging to the exporting and the importing countries in this region in particular and worldwide trade in general. There has already been a negative impact on economic cooperation and the long term development in Southeast Asia and further tensions could be highly damaging for all of the countries concerned.