Spain won’t allow Gibraltar to exercise “unfair competition” after Brexit

Foreign Ministry report describes the Rock’s position within EU as “unjustified privilege”

The European Council’s approval on April 29 of the Brexit negotiation directives, conditioning any future relationship between Gibraltar and the EU to a prior agreement between the United Kingdom and Spain, gives Madrid an unprecedented veto over the British Overseas Territory.

Pedestrians cross the runway at Gibraltar airport.
Pedestrians cross the runway at Gibraltar airport.JON NAZCA (REUTERS)

Ahead of the Brexit talks, the Spanish government has laid out what it sees as non-negotiable terms, among them that it will not allow Gibraltar to use unfair competitive practices against Spanish businesses.

Spain wants a “soft” Brexit, which would mean in practice little change to the current situation, although it understands that London’s decision to leave the single market and customs union and to impose limits on the movement of workers from the EU will require negotiation.

Spain believes the best solution would be to stick as close as possible to the letter or spirit of the current legislation

Where Spain does want to see change is regarding its relationship with Gibraltar. The Foreign Ministry’s Negotiations on the withdrawal of the United Kingdom from the EU, a document that has been sent to Congress, and to which EL PAÍS has had access, makes it clear that “Gibraltar is a matter of state,” and that the special regime the Rock currently enjoys “is a condition that Spain had to accept at the time [1986] to be able to join the then European Communities,” given that the United Kingdom had become a member back in 1973.

But over the last three decades, Gibraltar’s statute “has led to a situation of unjustified privilege,” the document reads.

The text points out that Gibraltar enjoys the four EU freedoms (free movement of people, goods, services and capital), yet is not part of the customs union or subject to British law, meaning that “it has developed its own regime which is extremely permissive in relation to tax, customs and business creation, which in practice has turned it into a tax haven.”

British expats in San Fullgencio, Alicante opposed Brexit.
British expats in San Fullgencio, Alicante opposed Brexit.Pepe Olivares

The document points out that the Rock is not part of the United Kingdom: it is a territory subject to decolonization whose foreign policy is dictated by London, and any future agreement between London and Brussels would require approval by Spain.

The text also spells out its no-go areas: “Spain cannot accept for the EU to negotiate with the United Kingdom a relationship that is not compatible with Spain’s position on territorial claims, and that doesn’t respect Spanish interests, those of the people of the Campo de Gibraltar [the Spanish territory adjacent to the Rock] and that [doesn’t] prevent a situation of unfair competition with Spanish territory.”

Rights of expats

A more pressing matter will be how to negotiate the rights of Europeans resident in the United Kingdom and British nationals living throughout the EU. Official figures (estimates are much higher) put the number of Spaniards residing in the United Kingdom at 102,000 (50,000 pay National Insurance, equivalent to Spain’s Social Security), and there are 286,000 British nationals living in Spain, of whom 105,000 are pensioners.

“Spain believes the best solution would be to stick as close as possible to the letter or spirit of the current legislation,” says the report, while recognizing that this clashes with London’s intention to limit the number of Europeans working in the United Kingdom through a quota system or by restricting access to healthcare.

Spain wants the rights of nationals who have been resident in either country for more than five years to be respected

Spain will argue during the Brexit negotiations for the “recognition of all rights of resident nationals in virtue of EU law.” These rights would apply to citizens and their families residing in another territory when the United Kingdom leaves the EU, which at the latest will be March 29, 2019.

Spain wants the rights of nationals who have been resident in either country for more than five years to be respected, and is also calling for an agreement on the rights of temporary residents (those who have been residents for more than three months and “who expect permanent residency.”)

The Spanish Foreign Ministry criticizes the UK authorities’ approach in accrediting residency, saying such procedures should be “as agile and transparent as possible,” through easily obtained documents and that “could even be expedited by national authorities.”

Regarding access to healthcare, Spain argues for “maintaining the current model of recognizing services [British nationals cost the Spanish healthcare system €250 million a year and receive €650 million in pensions] and underscores the need to “preserve those same rights for the [more than 7,000] transnational workers in Gibraltar.”

English version by Nick Lyne.

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