Beijing refused to participate in the case but the outcome could have lasting implications for China's rise as a superpower, global trade and even world peace.
What was the Philippines case?
There were three key points -- firstly, the Philippines wanted the court to decide
whether certain features in the sea were islands, reefs, low tide elevations or submerged banks.
It might sound like a minor point, but under UNCLOS each delivers different rights over the surrounding waters.
For example, a recognized island delivers an Exclusive Economic Zone of 200 nautical miles, giving the responsible country complete control over all enclosed resources, including fishing rights, oil and gas.
Importantly, artificial islands like those China has been building are not counted.
Secondly, the Philippines wanted the court to rule on exactly what territorial claims in the South China Sea their country was owed under UNCLOS, which would subsequently judge the validity of China's broad claims.
Finally, the Philippines wanted the court to determine if China had infringed on its territorial rights through China's construction and fishing activities in the sea.
What was China's stance?
China has long refused to take part in the case and, under the terms of the UNCLOS treaty, this was well within their legal right.
As the verdict got closer, Beijing spoke out, saying the case went beyond the jurisdiction of UNCLOS and insisting multiple times that it wouldn't acknowledge the court's decision.
Additionally, China ramped up a propaganda campaign to assert their historical rights in the region with state news agency Xinhua
publishing almost daily articles outlining their views.
Still, as has now transpired, the court's decision was widely expected to go against them.
What is UNCLOS?
The United Nation's Convention on the Law of the Sea, originally agreed to in 1982, was designed to allow countries to clearly lay out who controlled what off their coastline.
For the purposes of the South China Sea dispute, the most important part of UNCLOS is the exact definitions of what each country controls.
An island controlled by a country is entitled to a "territorial sea" of 12 nautical miles (22 kilometers) as well as an Exclusive Economic Zone (EEZ) -- whose resources -- such as fishery stocks -- the country can exploit, of up to 200 nautical miles (370 kilometres).
A rock owned by a state will also generate a 12 nautical mile territorial border but not an economic zone under UNCLOS, while a low-tide elevation grants no territorial benefits at all.
These obscure definitions are very important in the South China Sea and in the Philippines' case to the United Nations, as Manila's UNCLOS-mandated Exclusive Economic Zone overlaps with waters claimed by China and Vietnam.
It also explains why countries are so desperate to grab islands and reefs in the South China Sea to legitimize their claims.
Both China and the Philippines are signatories to the convention, as is Vietnam, although several other countries aren't -- including the United States.
It's also important to note the tribunal had no jurisdiction to decide any issues over the sovereignty of islands and rocks in the South China Sea -- the heart of the controversy. UNCLOS only deals with control of the waters surrounding them.
Why does it matter?
The South China Sea is one of the most politically sensitive regions in the world -- the Permanent Court of Arbitration's ruling is the first time an international court has passed judgment on the region's mess of claims and counter-claims.
At least five countries claim territory in the South China Sea, including China, the Philippines, Vietnam, Malaysia and Brunei.
Several tense standoffs have already threatened to throw the area into conflict, including in 2012 when the Philippine Navy intercepted several Chinese fishermen off the Scarborough Shoal
As China stretches its muscles as a growing superpower, the South China Sea has become a testing ground for whether they will rise as part of global society or outside it.
If they ignore or go against the court's arbitration, analysts say it could have worrying implications for the stability of the region and weaken an already fragile peace there.
The South China Sea is a major trade corridor, with $5.3 trillion in ship-borne trade passing through the waters each year.
"The best guesses suggest that more than half the world's maritime trade goes through the Straits of Malacca, along with half the world's liquefied natural gas and one third of its crude oil," southeast Asia expert Bill Hayton wrote in this book "The South China Sea: The Struggle for Power in Asia."
Will the ruling resolve anything?
Legally, the Permanent Court of Arbitration's decision is binding and there may be implications diplomatically for China if they refuse to abide by it.
"People are saying if China doesn't abide by the ruling then it undermines its own position that it is committed to maintaining a rules-based order," Singapore's Institute of South East Asian Studies senior fellow Ian Storey said, prior to the verdict.
"So the consequences will be to its reputation."
However, there is no military option to enforce the ruling -- United Nations troops will not be forcing China off Fiery Cross or Mischief Reef.
"The big question mark about the ruling is who is going to reinforce it, because ultimately it's a binding judgment, but if China chooses to ignore it it's very difficult for the Philippines to change the status quo," said Euan Graham, international security program director at Australia's Lowy Institute.
"I don't think anyone expects China to reverse its island building."
However, legal experts have said now the court has found in the Philippines favor, they could return to court and ask for other, stricter measures against China.