Gibraltar: The ongoing confrontation

Spain and the Rock have taken many of their grievances to Brussels, with uneven results for both

Miguel González
An ice-cream vendor serves customers in the long lines at the Gibraltar border.
An ice-cream vendor serves customers in the long lines at the Gibraltar border.marcos moreno

The first thing José Manuel García-Margallo did when he took up the post of foreign affairs minister in December 2011 was to reply to a letter that UK Foreign Secretary William Hague had sent 18 months earlier to Margallo’s predecessor, Miguel Ángel Moratinos.

In it, Margallo explained that he would not allow Hague to assert that London would not discuss the matter of Gibraltar’s sovereignty without prior approval from the residents of the British Overseas Territory.

The Spanish minister stated that the United Kingdom could consult with anyone it liked regarding the future of its territory, but that it could not refuse to talk following its commitment to do so at the 1984 Brussels Process.

Nobody knows how the Foreign Office took this late reply, but Margallo did not care. The point was to state his own position, to make it clear that he would not yield an inch, and to try to regain ground that had been lost under the previous Socialist administration.

Ever since then, the conflict over Gibraltar — whose moments of greatest tension typically occur during the summer — has resulted in dozens of skirmishes, many of them at the European level. The following are the main fronts that remain open in the ongoing confrontation between Britain and Spain:

» Fishing ban. The decision by Gibraltar’s chief minister, Fabian Picardo, to ban fishing in waters whose sovereignty is under dispute opened up Pandora’s box in March 2012. By doing so, Picardo was ignoring an informal agreement reached in 1999 with Spanish fishermen to let them work in the area. Now, Gibraltar claimed that the practice violated a 1991 environmental law. In theory, 53 fishermen from La Línea and 12 from Algeciras are affected by the ban, although in practice there are almost never more than six out fishing at any given time. The Gibraltar Assembly has already reformed this law and allowed Picardo to regulate fishing by decree, but he has failed to do so for opportunistic reasons.

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With per capita income of €53,000 and virtually no unemployment (it is less than two percent), Gibraltar is the third-wealthiest territory in the world. By comparison, residents of Cádiz struggle with more than 40-percent joblessness and per capita income of barely over €7,000. The question is whether the overseas territory is an emporium of wealth that does not spread to its neighbors because of the obstacles created by Spain, as Gibraltar claims, or whether the Rock is just a parasite that prevents growth in nearby Cádiz, as Spain believes.

An estimated third of Gibraltar’s GDP comes from tobacco and another 25 percent from online gaming. The Rock handles more than 60 percent of Britain’s internet bets, representing over €600 million. This lucrative business is now under threat from a new British law that could raise taxes from one percent to 15 percent.

Gibraltar is also a major financial center and its business register shows around 30,000 companies, of which 15,673 are active. Gibraltar says that only 66 of them have Spanish partners, but many are registered to front men. There is no agreement between Spain and Gibraltar to exchange fiscal information, although both are bound by three EU and OECD directives. Gibraltar says it has answered 33 Spanish requests for information, but Spain says that it has not received any relevant information to date.

» Concrete blocks. In July 2013, without prior notice, Picardo decided to sink 70 concrete blocks with iron spikes into the bay. His stated goal was to create artificial reefs, but Spain took it as a provocation. “Reefs are created where there are no fishing grounds, in order to build them, not where they are already there, in order to destroy them,” said the Spanish government. Spain denounced the practice before the European Commission, but EU environmental authorities have just said that it does not violate European legislation. Spain will produce new reports to back its position.

» Goodbye to “bunkering.” After years of complaints by environmental groups over the risk of an oil spill, the floating gas stations that ships from all over the world used to refuel cheaply are finally gone. But this success cannot be attributed to tougher Spanish legislation or to actions from Brussels – instead, it was the market that killed the practice. The Dutch firm Vopak has opened up a fuel storage plant in the port of Algeciras, from which it supplies fuel to ships in transit from barges. Also, Spain has eliminated the tax on sales of fuel to non-EU vessels, a fee that Gibraltar was not charging. Some sources also say that the decision may have been influenced by Gibraltar’s own green groups, which support Picardo. In any case, there is only one floating fuel station left in Gibraltar, and it is now inside the port, not out in the bay of Algeciras.

» Landfill. The landfill activities being conducted on the east side of the Rock using sand from the dune at the Spanish beach of Valdevaqueros (Tarifa), led the Spanish attorney’s office for environmental affairs to request that trucks carrying loads of sand be banned from crossing into Gibraltar. The latter then began importing sand and stones from Portugal and Morocco. Spain tried to stop this through diplomatic action. Sources in Gibraltar said that the current phase of Eastside Project, which includes building two breakwaters and renewing the sand at Sandy Bay, has been completed.

» Long lines at La Verja. Spain has never admitted to any link between both events, but the fact remains that after Gibraltar sank the concrete blocks into the bay, Spanish authorities increased border checks significantly, creating long lines of vehicles trying to get in and out of the Rock. The European Commission sent two delegations to investigate the matter in September 2013 and July of this year, and concluded that Spain has the right to conduct checks since Gibraltar is not part of Schengen or the customs union. But the EU said that some checks were “disproportionate” and asked authorities to be more selective on the basis of the estimated risk of smuggling. Spain is now introducing a new permit that will allow workers who need to cross the line daily to do so in a fast lane, and said it will introduce a new automated system to read license plates. Picardo insists that the border checks are “politically motivated” in an attempt to hurt the local economy.

» Tobacco smuggling. A recent report by the EU’s anti-fraud office, OLAF, found indications of smuggling and money laundering in Gibraltar. Spain took this as a confirmation of its long-held complaints. Between 2010 and 2012, seizures of smuggled tobacco products grew 213 percent. Beginning on August 1, Gibraltar set a limit of one carton per person, and it has announced an import ceiling of 90 million packs beginning next year. According to OLAF, tobacco smuggling has cost European coffers €700 million since 2010.

» Tax regime. On Spain’s request, the European Commission has opened proceedings to determine whether Gibraltar’s fiscal regime, which collects corporate tax of 10 percent on earnings obtained there, represents covert state aid. Spain already managed to have Gibraltar’s earlier tax system be declared illegal by the Strasbourg court. By then, though, Gibraltar had replaced its regime with a new one.

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