Gibraltar, the rock of discord


The European Union has stepped in once again to solve the longstanding dispute between Spain and UK. And Madrid wins: another negative Brexit outcome for Elizabeth’s subjects

Barcelona – The fraught negotiations held in November between London and Brussels in order reach an agreement on implementing Brexit, saw the spotlight return to the question of the British overseas territory of Gibraltar, a historic bone of contention in bilateral relations between Spain and the United Kingdom.

“With Brexit we all lose, but when it comes to Gibraltar, Spain wins. We are currently enjoying a position of unprecedented strength in relation to the United Kingdom. As of now everything is up for discussion, including the question of sovereignty, to resolve a conflict that has existed for 300 years,” announced Spanish Prime Minister Pedro Sánchez attending a meeting with British negotiators and the Council of Europe on the future of Gibraltar.

Spain had, in fact, threatened to veto the Brexit withdrawal agreement unless, as part of later negotiations between the EU and the United Kingdom, Madrid would be provided a veto over questions concerning the British dependency. Spanish intransigence was eventually rewarded: future relations between Europe and Gibraltar will take place in parallel to those with London. Moreover, four Memorandums of Understanding relating to various issues, such as the environment and cross-border workers who arrive daily in the British dependency, have been signed.

An initial agreement limited the Brexit transition period to 21 months, concluding at the end of 2020. The proposed deal, brokered by Theresa May and the 27 EU member states, concerning the conditions of the UK’s withdrawal from Europe, however, required the approval of the British parliament, which voted to reject agreement.

Aside from the uncertainty concerning future relations between the EU and the UK, which will undoubtedly condition the effective scope of agreements between the latter and Spain, Brexit has succeeded in bringing the question of Gibraltar sharply back into view in a European context. A territory of just 6.7 km2, strategically positioned at the mouth of the homonymous strait, it first became a thorn in the side for Spain in 1713, when the territory was ceded to the English as part of the Utrecht Treaty that brought a conclusion to the War of the Spanish Succession.

Madrid never fully accepted losing sovereignty over Gibraltar, applying pressure through various United Nations resolutions that recognised Spain’s right to territorial integrity and inviting the United Kingdom to put an end to the colonial status of what the Spanish call el Peñon (the Rock). The UK for its part, continues to point to Gibraltar’s right to self-determination, certified in the opinion of the British government by the result of a referendum in 1967 that saw a 99.64% majority of the local population express a preference to remain under British Sovereignty.

In 2002 the Gibraltar Government held another referendum, this time the proposal was potential joint sovereignty between Spain and the United Kingdom. The idea was rejected by the territory’s 30 thousand or so inhabitants, who underlined, with a landslide majority of 98.48%, their exclusive loyalty to the UK.

The territorial dispute between London and Madrid experienced its period of greatest tension during the Franco regime, when the Spanish dictator ordered the closure of the border between Spain and Gibraltar in 1969. It remained closed until reopening partially in 1982. In recent years, however, alongside the almost exclusively nationalist perspectives on the question of Gibraltar, concerns about the striking economic inequality between the British dependency and the bordering Spanish province of Campo di Gibraltar have begun to gain prominence.

Gibraltar is not part of the United Kingdom, and therefore not a fully entitled member of the EU. The link with London, however, has guaranteed the territory access to the single market without having to join the EU customs union and consequently without the obligation of having to apply VAT. This exceptional condition has been exploited by the authorities of the small territory in order to develop an economic model based on its  tax haven status, a feature that has enabled Gibraltar to achieve a GDP per capita that is among the highest in the world – around 100 thousand dollars in the last financial year, with growth of 6% over the last 12 months. These figures certify a level of affluence in stark contrast to the conditions on the other side of the border, where La Linea de la Concepción, the Spanish municipality that neighbour’s Gibraltar, has experienced more than 10 years of unemployment in excess of 30%, positioning it at the top of the European ranking for long-term unemployment.

Spanish concerns focus mainly on the trade in contraband tobacco, a phenomenon caused mainly by the low cost of the product in Gibraltar. More than 30% of all contraband tobacco in Spain originates in the British territory, where a packet of cigarettes costs on average two euros, but the local authorities claim that the massive imports of cigarettes – 72million packets were imported in 2017, netting 180 million euros – serve to satisfy the demand from approximately 10 million tourists that visit el Peñon each year. One of the memorandums signed between London and Madrid, in fact, establishes that the average difference in the price of tobacco products sold in Gibraltar, following Brexit, should not exceed 32% of the cost of the equivalent products in Spain.

In addition to the question of tobacco, Spain would also like to see limits put in place for the financial transactions that make Gibraltar a global oasis for offshore finance, inviting the local government to introduce greater transparency concerning the exchange of information of a fiscal nature. Finance has evolved into one of the cornerstones of Gibraltar’s economy together with the gaming sector, with tens of online betting companies having opted to register their businesses in the British territory, attracted by the permissive laws governing the concession of licenses.

“If you are Spanish or another European nationality and you live and work in Gibraltar, all your rights will be guaranteed in the future, whether the United Kingdom decides so or not,” claimed the Chief Minister of Gibraltar Fabian Picardo, in the months following the Brexit referendum. In spite of the determination to remain under British sovereignty, 96% of the colony’s inhabitants voted in favour of remaining in Europe, one of the most pro-European results in all of the UK and its territories. This choice was motivated mainly by the concern about the introduction of time-consuming checks on the Spanish border once Brexit has been implemented. These would make it impossible for the territory to benefit from the contribution to the local economy of around 12 thousand Spanish cross-border commuters employed mainly in the tourism sector.

“For us it would be more secure to remain in Europe, but if the United Kingdom has decided differently, we will have to guarantee the protection of Gibraltar within the context of Brexit,” underlined Picardo. The recent memorandum of understanding signed between Madrid and the British government established that “Spanish citizens who work in Gibraltar “will not be discriminated against” likewise nor will inhabitants of the British colony with interests in Spain. This generic formula was introduced to calm the waters while waiting for London to define its relationship with Europe.

The current year is set to be decisive for Gibraltar also on the home front, with new elections that will define the make up of the local parliament due to take place. Polls indicate a victory for the alliance between Labour and the Liberals, as was the case in 2011 and 2015. However, Chief Minister Picardo, a key Labour figure, has declared that the electoral meetings due to take place in November 2019, will not be held until the United Kingdom has officially withdrawn from the EU, underlining how it could be irresponsible to hold an early election, in spite of the advantages indicated in the polls for his party.


This article is also published in the March/April issue of eastwest.

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