China has no claim to large tracts of the South China Sea and has violated The Philippines' sovereignty by building artificial islands in the smaller country's waters, an international court has found in a landmark ruling.

In a judgement that is even tougher on Beijing than experts anticipated, the Permanent Court of Arbitration in The Hague has rebuked China on everything from its interference in its smaller neighbour's fishing to the environmental devastation wrought by its large-scale construction of islands on fragile coral reefs.

Land reclamation of Mischief Reef in the Spratly Islands in the South China Sea. Photo: AP

The tribunal threw out China's "nine dash line" which asserts the country's claim to most of the South China Sea based on historic rights, insisting that the United Nations Convention on the Law of the Sea is the prevailing law.

"The tribunal concluded that there was no legal basis for China to claim historic rights to resources within the sea areas falling within the 'nine-dash line'," it said in a statement.

The judgement sets the scene for a tense period in international diplomacy, with Beijing likely to consider stepping up its activity in the waters as a show of its disregard for the tribunal's jurisdiction.

Philippine crewmen gesture towards a Chinese ship in 2014. Photo: AP

Foreign Minister Julie Bishop issued a statement late on Tuesday night calling on both sides to abide by the ruling, describing it as "final and binding" and "an important test case for how the region can manage disputes peacefully".

She stressed the finding was not about who owned the rocks and reefs but about "the lawful uses of our oceans" - an implicit rejection of Beijing's stance that the tribunal had no jurisdiction.

The Chinese Ministry of Foreign Affairs swiftly issued a statement saying the ruling was "null and void and has no binding force".

Filipinos react as the tribunal ruled against China. Photo: AP

It accused the Philippines of "bad faith" and accused the tribunal of abusing the UN convention and getting its facts wrong.

Crucially the judges also found that the Beijing's artificial islands in the Spratly archipelago do not generate any extended maritime zone because the natural features could not sustain human habitation. This means it has violated the Philippines' sovereignty where building has happened within the smaller country's exclusive economic zone such as Mischief Reef on which Beijing has placed a military-grade airstrip.

"Having found that certain areas are within the exclusive economic zone of the Philippines, the tribunal found that China had violated the Philippines' sovereign rights in its exclusive economic zone," it stated.

The legal precedent that island construction generates no extended maritime zones - such as 200 nautical mile exclusive economic zones - undercuts Beijing's attempts to bolster its broader territorial claims.

The US and Australia are among the players who have been watching the legal process closely and will have to respond, possibly with concrete action such as so-called "freedom of navigation" patrols close to the territory claimed by China.

As well as ruling more strongly than expected on the legality of the artificial islands, the tribunal rebuked China in particular on the environmental destruction its work had caused.

The large-scale reclamation had "caused severe harm to the coral reef environment", putting China in violation of the UN convention. It had also failed to stop its fishermen harvesting endangered sea turtles, coral and giant clams "using methods that inflict severe damage on the coral reef environment".

Chinese law enforcement ships had "created serious risk of collision and danger" and thereby breached a UN convention on safety at sea while obstructing Philippines fishermen.

It had also breached Philippines sovereignty by interfering with its fishing and petroleum exploration.

Analysts expressed astonishment that the ruling was so uncompromising in its treatment of China's behaviour.

"It is an astonishing, emphatic victory for the Philippines," said Euan Graham, head of international security at the Lowy Institute. "The language is unequivocal, highly critical and damaging to China's reputation."

He said it was "huge" that the tribunal had ruled none of the Spratlys generated extended maritime zones. The wholesale dismissal of the nine-dash line was "massive news" for other countries such as Vietnam that are also locked in territorial disputes with China.

Dr Graham said if anything the damning result might leave moderates in China little room to argue against hardliners that they should work within the international system and the UN convention.

Rory Medcalf, head of the national security college at the Australian National University, said the finding was "more comprehensively damning than even many of China's critics had expected".

He said neither the Philippines nor the US were unlikely to do anything in response to the ruling that could risk military confrontation with Beijing, but "this could be a first step in more concerted pushback against China".

While experts have warned Beijing may respond to the ruling assertively, perhaps by demanding other countries ask permission to fly over the South China Sea, Professor Medcalf said that "if the Chinese leadership is being well-advised it will be looking for ways to try and lower the temperature rather than escalate".

He said it was striking that the tribunal had been so forthright on the environmental issues.

"There are strong elements of this that go beyond geopolitics and security ... to the profound criticism of China's behaviour in the global commons."

The crucial question now was how the region responds, Professor Medcalf said. He cast it as a major decision point for the regional grouping the Association of South East Asian Nations, which has previously failed to take a unified stance on China's behaviour.

"Countries like Australia should now move quickly to encourage solidarity in regional organisations in favour of international law and call upon China to respect the award of the court," he said.

Both Professor Medcalf and Dr Graham said they expected a cautious response from Australia, though Professor Medcalf said the Turnbull government should reserve its right to carry out naval patrols close to Chinese-claimed territory and should absolutely continue RAAF flight patrols over the sea.