An international tribunal ruled Thursday it had the power to hear a case brought by the Philippines over disputed islands in the South China Sea, in a move likely to trigger fury in Beijing.

Manila has insisted the UN Convention on the Law of the Sea, which the Philippines and China have both ratified, should be used to resolve the bitter territorial row over isolated reefs and islets, which has triggered growing international alarm.

But China has refused to participate in the proceedings, arguing the Permanent Court of Arbitration -- which is more than a century old and based in The Hague -- had no jurisdiction over the case.

"Reviewing the claims submitted by the Philippines, the tribunal has rejected the argument" by China that the "dispute is actually about sovereignty over the islands in the South China Sea and therefore beyond the tribunal's jurisdiction," the court said in a statement.

Instead, the court ruled the case reflects "disputes between the two states concerning the interpretation or application of the Convention" -- something which falls within its remit.

China insists it has sovereign rights to nearly all of the South China Sea, a strategic waterway through which about a third of all the world's traded oil passes.

The disputed waters -- claimed in part by Vietnam, Malaysia, the Philippines, Taiwan, and Brunei -- have also become the stage for a tussle for regional dominance between Beijing and Washington, the world's two largest economic and military powers.

Following a stand-off between Chinese ships and the weak Filipino Navy in 2012, China took control of a rich fishing ground called Scarborough Shoal that is within the Philippines' exclusive economic zone.

China has also undertaken giant reclamation activities, raising fears it will use artificial islands to build new military outposts close to the Philippines and other claimants.

- Ruling in 2016 -

The tribunal -- set up in 1899 to resolve international disputes between countries -- stressed Thursday its ruling did not yet go to the heart of the merits of Manila's case, which was first filed in 2013.

A new hearing will now be held behind closed doors in The Hague, and a final ruling is not expected until next year.

The tribunal agreed it would take up seven of the 15 submissions made by Manila, in particular whether Scarborough Shoal and low-tide areas like Mischief Reef can be considered islands, as China contends.

It will also mull whether China has interfered with Philippine fishing activities at Scarborough Shoal.

But it set aside seven more pointed claims, mainly accusing Beijing of acting unlawfully, to be considered at the next hearing on the actual merits of Manila's case.

In a July hearing in the Hague, Philippine Foreign Secretary Albert del Rosario warned the integrity of UN maritime laws was at stake.

China's behaviour had become increasingly "aggressive" and negotiations had proved futile, del Rosario said.

But the court on Thursday also directed Manila to narrow down the scope of its final request that it should order that "China shall desist from further unlawful claims and activities."

China has said it will not abide by any ruling. But the Philippines hopes a judgement in its favour will pressure China into making concessions.

The tribunal said Thursday's ruling establishing its competence in the affair had been "unanimous" among the panel of five judges.

And it stressed the ruling "concerns only whether the tribunal has jurisdiction to consider the Philippines' claims and whether such claims are admissible."