By Michael Martina and Lesley Wroughton

VIENTIANE (Reuters) - China scored a diplomatic victory on Monday as Southeast Asian nations dropped a U.S.-backed proposal to mention a landmark international court ruling against Beijing's territorial claims in the South China Sea in a joint statement.

A weekend deadlock between Association of Southeast Asian Nations (ASEAN) foreign ministers was broken only when the Philippines withdrew its request to mention the ruling in the face of resolute objections from Cambodia, China's closest ASEAN ally.

China publicly thanked Phnom Penh for the support, which threw the regional bloc's meeting in the Laos capital of Vientiane into disarray.

The United States had earlier on Monday urged ASEAN to make a reference to the July 12 ruling by the U.N.-backed Permanent Court of Arbitration, in which U.S. ally Manila won an emphatic legal victory over China on the dispute.

In a meeting with host Laos' Foreign Minister Saleumxay Kommasith, U.S. Secretary of State John Kerry "urged ASEAN to reach consensus and issue a joint statement on the arbitral tribunals recent ruling on the South China Sea", said U.S. State Department spokesman Mark Toner.

Kerry pressed the issue during other bilateral meetings with ASEAN members, Toner said.

Competing claims with China in the vital shipping lane are among the most contentious issues for the 10 members of ASEAN, who are pulled between their desire to assert their sovereignty while fostering ties with an increasingly assertive Beijing.


The Philippines and Vietnam both wanted the ruling, which denied China's sweeping claims in the strategic seaway that channels more than $5 trillion in global trade each year, and a call to respect international maritime law to feature in the communique.

But ASEAN works strictly by consensus, and Cambodia rejected the wording on the ruling, diplomats said, backing instead China's call for bilateral discussions.

Manila backed down to prevent the disagreement leading to the group failing to issue a joint statement after a meeting for only the second time in its 49-year history.

The communique referred instead to the need to find peaceful resolutions to disputes in the South China Sea in accordance with international law, including the United Nations' law of the sea, to which the court ruling referred.

"We remain seriously concerned about recent and ongoing developments and took note of the concerns expressed by some ministers on the land reclamations and escalation of activities in the area, which have eroded trust and confidence, increased tensions and may undermine peace, security and stability in the region," the ASEAN communique said.

ASEAN Secretary General Le Luong Minh said that the communique was not a victory for China, but for ASEAN's values and principle of finding consensus. But he conceded an earlier proposal for the communique referred to the court's decision.

In a separate statement, China and ASEAN reaffirmed a commitment to freedom of navigation and overflight in the South China Sea and said they would refrain from activities that would complicate or escalate disputes. That included inhabiting any presently uninhabited islands or reefs, it added.

China's Foreign Minister Wang Yi said a page had been turned after the "deeply flawed" ruling and it was time to lower the temperature in the dispute.

"It seems like certain countries from outside the region have got all worked up, keeping the fever high," Wang told reporters.

China frequently blames the United States for raising tensions in the region and has warned regional rival Japan to steer clear of the dispute.


The United States, allied with the Philippines and cultivating closer relations with Vietnam, has called on China to respect the court's ruling.

It has criticized China's building of artificial islands and facilities in the sea and has sailed warships close to the disputed territory to assert freedom of navigation rights.

Meeting U.S. National Security Adviser Susan Rice in Beijing, Chinese State Councillor Yang Jiechi said both countries needed to make concerted efforts to ensure stable and good relations between the two major powers.

"So far this year, relations between China and the United States have generally been stable, maintaining coordination and cooperation on bilateral, regional and international level. Meanwhile, both sides face challenging differences that need to be carefully handled," said Yang, who outranks the foreign minister.

Kerry arrived in Laos on Monday for the ASEAN regional forum and East Asia summits.

After a meeting with the foreign ministers of Japan and Australia, the three countries issued a statement in which they called on China and the Philippines to abide by the court ruling "which is final and legally binding on both parties".

"The ministers stressed that this is a crucial opportunity for the region to uphold the existing rules-based international order and to show respect for international law," they said.

Kerry was also expected to discuss maritime issues in a meeting with Wang on Monday.

(Additional reporting by Simon Webb and Manuel Mogato in VIENTIANE, and Ben Blanchard in BEIJING; Writing by Simon Webb; Editing by Lincoln Feast and Alex Richardson)