The U.S. Pacific Fleet Commander has warned of a possible arms race in the disputed South China Sea which could engulf the region, as nations become increasingly tempted to use military force to settle territorial spats instead of international law.

Commander Admiral Scott Swift urged nations, like China, to seek arbitration to settle maritime disputes.

"My concern is that after many decades of peace and prosperity, we may be seeing the leading edge of a return of "might makes it right" to the region," Swift said on Monday in a speech in Hawaii, according to a copy seen by Reuters.

By resorting to military strength to impose territorial claims, nations, including China, risked sparking a military arms race that could engulf the region, he said.

"Claimants and non-claimants alike are transferring larger shares of national wealth to develop more capable naval forces beyond what is needed merely for self defense," Swift said.

China claims most of the South China Sea, through which more than $5 trillion of world trade ships every year, a fifth of it heading to and from U.S. ports.

Beijing is building seven man-made islands on reefs in the Spratly Islands, including a 3,000-metre-long (10,000-foot) airstrip on one of the sites, according to satellite imagery of the area.

"Even now, ships and aircraft operating nearby these features, in accordance with international law are subject to superfluous warnings that threaten routine and commercial operations," Swift said, speaking at the Cooperative Strategy Forum to naval commanders from Japan, the Philippines, Indonesia and other countries.

Vietnam, Malaysia, Brunei, the Philippines and Taiwan also claim parts of the South China Sea.

In a challenge to China's island building program, Manila has asked the Permanent Court of Arbitration in The Hague to affirm its right to areas within 200 nautical miles of its coastline, under the terms of a U.N. convention.

"The Arbitration Tribunal's case between the Philippines and China could become the latest opportunity to demonstrate lawful access to regional prosperity for all nations," Swift said.

Beijing so far has rejected the courts jurisdiction and has boycotted the hearing. Rulings are supposed to be binding on its member countries, which include China. But the tribunal has no powers of enforcement and its verdicts have sometimes been ignored.

(Editing by Michael Perry)