Gibraltar: Time to get off the fence - Foreign Affairs Committee Contents

3  2012-14 escalation and current situation

13. Despite the limitations of the Trilateral Forum and CordobaAgreement, the period can be seen with hindsight as a high water mark of diplomatic progress on Gibraltar.In 2012, a new government in Spain, which was elected on a manifesto that promised a more hardline approach to Gibraltar, began once again to exert pressure on the Territory. We turn now to consider theways in which Spain is currently seeking to bring pressure to bear on Gibraltar, and its reasons for doing so.

Suspension of diplomatic talks

14. In November 2011, the Spanish leadership changed as a new centre-right Government was elected in Spain, under Prime Minister Rajoy of the People's Party (Partido Popular, or PP). The new PP Foreign Minister, Jose Garcia Margallo, immediately ended the Trilateral Forum and called on the UK to enter bilateral talks with Spain on sovereignty over Gibraltar, which he said "had been on hold for too long".[11] The current Spanish government states that it will not return to the trilateral talks with the full participation of the Government of Gibraltar, which Mr Margallo refersto as "the local authorities".[12]

15. All of the parties state that they have nonetheless sought to re-start dialogue in some form. The UK and Gibraltar have reaffirmed their commitment to trilateral talks, but in the absence of progress, in April 2012 the Foreign Secretary proposed 'ad hoc' talks "with the relevant and competent parties present"to deal with certain practical issues, though not sovereignty.The Spanish Government has in response re-stated its desire for bilateral talks on sovereignty, but has also said that it is willing to accept the creation of these 'ad-hoc' forums "in which other authorities, such as the Gibraltarian government and the regional government of Andalusia, could participate regarding areas where they have competencies".[13]Progress on these talks has appeared to be imminent ever since. Mark Simmonds told us in December 2012 that the invitation to ad hoc talks was still on the table and that the UK was encouraging the Spanish government to re-establish dialogue:

    we are trying to find ways and mechanisms to ensure that communication is re-engaged between the three partners in a responsible, sensible and structured way.[14]

In December 2013, he said "we are still awaiting specific dates from the Spanish as to when these ad hoc talks might take place, but we continue to lobby and push for them to take place as a key part of our diplomatic strategy."[15]

16. In March 2014, Gibraltar's Chief Minister, the Hon. Fabian Picardo, seemed less optimistic and provided some insight into his view of the continuing negotiations:

    Spain and the Spanish Government are trying simply to ensure that there is an ad hoc meeting with four parties around the table, not three, and that that should be the only instance of those ad hoc meetings that occurs. Spain will then simply cry childishly, "We achieved the quadrilateral; it's the end of the trilateral." That is not the way to advance this diplomatically. [16]

Mr Picardo addedthat the UK and Gibraltar had "bent over backwards" to meet the 'red lines' of each of the three partners and that "we could have an encounter to deal with the issues, but it is not happening."[17]Mr Lidington told us that the Government "continue to hope" for progress on talks, but acknowledged that the approach of a general election in Spain in 2015 could mean political parties were "less willing to take risks".[18] Nonetheless, in response to a Parliamentary Question on 18 June 2014, the Government said it was "actively discussing" the proposal for ad hoc talks with the Governments of Spain and Gibraltar and "hope it will be possible to hold talks soon."[19]

17. The rhetoric of the current Spanish Foreign Minister is noticeably more forceful about Gibraltar, when compared to that of his predecessor. Chief Minister Picardo told us that Mr Margallo's first words on becoming Spain's Foreign Minister were to claim that 'Gibraltar is Spanish'.[20] Since then, Mr Margallo has announced that "playtime is over" when it came to Gibraltar,[21] and has stated that he would not set foot on Gibraltar unless it was under a Spanish flag.[22]Much of Mr Margallo's criticism of Gibraltar is based on its financial and economic model, which he claims is based on "free trade, opacity and low taxation".[23]In September 2013, the UK Foreign Secretary said Mr Margallo's heightened rhetoric was "concerning" and "clearly intimidating for the people of Gibraltar".[24]


18. The Spanish Government argues that Gibraltar is a "tax haven" whose tax regime is "characterised by opacity". Mr Margallohas been outspoken about alleged tax fraud originating from Gibraltar, both from 'shell' companies and by individuals who he claims are located there only for tax purposes. He recently told Spanish legislators that Gibraltar had the fourth largest per capita income in the world, adding that it was:

    at the very least surprising that a peripheral territory, with an area of 6.8 square kilometres and totally lacking in natural resources, should attain such enviable heights of prosperity. This obliges us to reflect upon what is going on, at least insofar as it affects us. We welcome the happiness of others, but not if it is acquired at our expense.[25]

In addition to complaints about the tax regime allowing offshore companies to avoid tax elsewhere, Mr Margallo has also criticised Gibraltar's gaming industry which he says is causing Spain "financial harm". More seriously, he has alleged that significant amounts of money laundering take place, alleging that 200 major investigations "have ended up or are ending up in Gibraltar". In response to these problems, Mr Margallo has threatened more serious economic measures against Gibraltar, including a possible action by the Spanish tax authorities relating to property owned by Gibraltarians in Spain, and has threatened to involve EU institutions in complaints against Gibraltar.

19. Gibraltar is a low-tax jurisdiction. It has a low rate of corporation tax of 10%; and no Value Added Tax (VAT). Chief Minister Fabian Picardo made no apologies for Gibraltar's low tax regime, telling us that many other states, including the UK, competed on tax and "we are all talking about competitive rates of corporate tax being the way forward and the way to attract business to each of our jurisdictions."However, he robustly dismissed allegations about tax transparency, stating that "Gibraltar has been proud to lead other overseas territories, and internationally, in the fight against tax evasion. […] there is a big difference between tax evasion and tax avoidance".[26]Mr Picardo told us that his Government had been supportive of international efforts to ensure "total transparency in relationships between companies and subsidiaries indifferent parts of the world, so that nobody can pretend to be paying tax in one place but notactually pay it". He said that while there was some work to be done to improve the transparency of 'beneficial ownership'of companies, the Government of Gibraltar had nonetheless ensured that Gibraltar had fully incorporated all EU rules on financial services and money laundering, and that Gibraltar was at an "identical" stage to the UK when it came to transparency. Mr Picardo added:

    we have 27 tax information exchange agreements, not with small economies,but with some of the biggest economies in the world, including the United States, Germany and France. Those that we have with the European Union have now been overtaken by the multilateral directive, which is the equivalent, according to the OECD, of tax information exchange agreements. So now we have even got one with Spain, for example, even though they did not want to sign one with us bilaterally. The OECD multilateral convention has the same effect as a tier between all those who are signatories, and there are 71 signatories. Gibraltar asked the UK to extend the multilateral convention to Gibraltar.[27]


20. A number of observers have attributed the Spanish Government's approach to Gibraltar to its wish to distractfrom Spain's current economic and social difficulties and the corruption scandals involving the current government.Mr Simmonds, the FCO Minister, said that Gibraltar was "perhaps a domestic distraction while the Spanisheconomy has significant problems", while Mr Picardo put it more bluntly, stating,"It is clear to me that Gibraltar is going to once again be used as a whipping boy when they are feeling a little less popular".[28]

21. We are disappointed by the reversal of the progress that had been made under the TrilateralForum.The Government is right to continue to offer talks that involve all three main partners, and to urge Spain to re-engage on this basis as the only possible format for talks.Progress on re-starting talks is long overdue. In response to this report, the Government should set out the offer it has made to the Spanish governmentand its strategy for overcoming the problems. The UK Government should make clear to its international partners that it is a change in Spanish government policy, rather than UK policy,that has brought about the suspension of the much-needed talks.

Illegal incursions into Gibraltarian territorial waters


[Source: provided by Foreign & Commonwealth Office]

22. Gibraltar and the UK consider that Gibraltar's territorial waters extend three miles from the Territory according to the UN Convention on the Law of the Sea (UNCLOS). Spain insiststhat the Treaty of Utrecht did not cede any coastal waters to Gibraltar.Incursions by Spanish vessels into British Gibraltarian Territorial Waters (BGTW) have therefore long been a source of tension between Gibraltar and Spain, but they have escalated to new heights since 2012.

23. These illegal incursions do not include vessels conducting the 'right of safe passage' as determined in UNCLOS (that is, the right to peacefully and directly traverse territorial waters), used by many vessels every day in BGTW. Rather, they fall into two main categories: Spanish police vessels accompanying Spanish fishermen seeking to conduct commercial fishing in BGTW; and other Spanish state vessels (i.e. police, naval or research vessels) asserting their supposed right to be active in those waters. Data from the UK Government tracking illegal incursions into BGTWshows a pronounced increasein illegal incursions by Spanish government vessels since March 2012:[29]

24. The increase is in part due to a decisionin 2012 by the incoming Gibraltar Governmentto end an informal agreement that had previously allowed some Spanish fishing vessels to operate in BGTW. There is a long history to the fishing dispute: in 1991 Gibraltar passed legislation that made it unlawful to use the most common commercial fishing methods in Gibraltarian waters, for reasons of conservation. Nonetheless, some fishing was allowed to continue, until a surge in the number of fishing boats in 1997-98 prompted the Gibraltarian government to enforce it. Protests followed, and an agreement was brokered in 1998 between the Gibraltarian Government and Spanish fishermen's representatives thatallowed for limited fishing.Our predecessor Committee welcomed the agreement as a practical response but urged Gibraltar to harmonise its legislation to reflect the agreement. In 2012, the new Government of Gibraltar ended the agreement (having campaigned on a manifesto promise to do so), explaining that it was contrary to Gibraltarian law. This resulted in a surge of illegal incursions by Spanish Guardia Civil boats accompanying Spanish fishing vessels.The Government of Gibraltar has since been in negotiation with Spanish fishermen, and the Chief Minister told us that they were close to finding a resolution.However, the Chief Minister rejected the suggestion that fishing disputes were the main cause of the problem, stating:

    At the early stages of what you call the fishing dispute, some of those state actors—the Guardia Civil in particular—accompanied Spanish fishing vessels into our waters. Therefore you would count that as an incursion. But that has not happened for months, or for at least a year or so.

    What we are seeing is an increase in incursions exclusively by state actors, doing things totally unrelated to fishing, for example, interfering with executive action being taken by the Gibraltar authorities; interfering with lawful bunkering[30] activities in our waters; and filming those who are bunkering in our waters in an attempt to intimidate them. Although I would very much wish that we could get rid of the problem of incursions simply by resolving the fishing issues that we have with 60 fishermen in Spain, I do not think that we will.[31]

25. Aside from the fishing dispute, Spanish state vessels (ie. Guardia Civil or even naval or research vessels) also conduct incursions into BGTW in order to demonstrate a form of control and non-recognition of British sovereignty over BGTW. The refusal of these vessels to recognise the authority of the Royal Gibraltar Police (RGP) and Royal Navyin BGTW has led to a number of dangerous incidents, for instance:

·  On 25 June 2013, rubber bullets were reportedly fired by a Spanish Guardia Civil vessel pursuing a jet skier into BGTW. Mr Lidington complained to the Spanish authorities, but Spain denies that the incident took place, stating that no incident had taken place and no shot was fired.[32]

·  On 30 October 2013 a Guardia civil patrol boat approached Royal Navy vessels in BGTW and conducted "several dangerous manoeuvres", and a minor collision occurred (no damage or injuries resulted).[33]

·  On 2 April 2014, the research ship Angeles Alvarino accompanied by a Guardia Civil vessel entered BGTW, and "dangerous manoeuvring" by the Guardia Civil vessel resulted in a minor collision with a police boat.

·  In late April 2014 Spain claimed that the Royal Gibraltar Police had caused injuries to a Guardia Civil officer; press reports stated that the officer was injured following a collision with an RGP launch.[34]

26. While visiting Gibraltar, we were shown video evidence of the aggressive tactics used by some vessels, resulting in collisions anda danger of serious damage and injury. The naval and police officers we spoke to considered that if the current activity were to continue, it would be only a matter of time before there was serious injury. Such incursions deliberately make it difficult, if not impossible, for the Royal Gibraltar Police (RGP) and Royal Navy vessels to enforce their authority and British sovereignty without becoming involved in a potentially seriousincident at sea. We were impressed by the professionalism and restraint with which both the RGP and Royal Navy conducted their work in the face of clear and repeated provocation.

27. On other occasions, Spanish vessels have entered BGTW and simply refused orders from British authorities to leave. For example:

·  On 19 November, 2013 a Spanish government research ship entered Gibraltarian waters and refused orders from the Royal Navy to leave. Its captain said the ship was conducting "oceanographic works in the interest of the European community" at the behest of the Spanish government. A small British patrol boat closed in on the Spanish vessel, ordering it to leave Gibraltar waters, but it refused. The Spanish ship finally left the area after almost 24 hours. Mr Lidington strongly condemned the "provocative incursion", and the FCO summoned the Spanish Ambassador the following day. [35]

·  On 19 February 2014, a Spanish warship entered the waters around Gibraltar causing the diversion of a Royal Navy ship and thereby disrupting a British forces parachute training exercise.Warnings were issued to the Spanish vessel and a Royal Navy ship 'shadowed' the vessel, but it left only after radioing to state that it was in Spanish waters.[36]

28. In a further attempt to demonstrate a form of control over BGTW, in 2008/9 Spain applied to the European Commission to designate almost all of BGTW as a protected marine area. The application was approved before the UK was aware of the designation. The UK tried to appeal but lost on a technicality relating to the timing of the case.We will return to the UK Government's mishandling of this situation later in this report.


29. In July 2013, the Gibraltarian government installed concrete blocks in BGTW in an area north-west of the airport runway, in order to create an artificial reef to encourage sea life to flourish in a marine reserve. Spain has vigorously protested about the installation of the concrete blocks.The Foreign Minister has stated that the blocks were placed in Spanish waters "without the necessary authorisation"; as they are located in waters off the isthmus connecting the Rock of Gibraltar to the mainland, and he argues that neither the isthmus nor the water was ceded under the Treaty of Utrecht.Spain also considers that the blocks contravened environmental laws; and damaged its fishing industry because Spanish fishing nets were in danger of catching on them.The Government of Gibraltar argues that the reef was installed in BGTW (it does not accept Spanish claims over sovereignty of the isthmus); and that it was installed for conservation purposes. The Government of Gibraltar saidthat the artificial reef is identical to a number of artificial reefs Spain has itself recently installed in its own waters for the same purpose,[37] and the Foreign Secretary repeated this claim in his statement on 2 September 2013.[38]Anger about the installation of the reef has been widely seen as the motivation for the Spanish government's imposition of restrictive checks at the land border between Spain and Gibraltar.It was also the reason that lorries carrying construction materials were turned away from the border as they tried to enter Gibraltar in July 2013.[39]

30. We are deeply concerned by the cavalier approach taken by Spanish vessels in their attempts to assert an illegitimate form of authority in British Gibraltarian Territorial Waters. We consider that the actions taken by the Government of Gibraltar in relation to the fishing agreement and concrete reefdo not justify the increase in incursions, nor the hostile tactics of some of the vessels that conduct them.We recommend a more robust approach in defending British Gibraltarian Territorial Waters. In its response to this report, the Government should set out the naval and police options it has identified to this end; and those it intends to pursue.


31. In August 2013, the Spanish Government also announced that it would take steps to outlaw the refuelling of ships at sea (known as bunkering) in the waters surrounding Gibraltar, for environmental reasons. The Spanish government warned that it would impose fines on companies flouting the ban. Bunkering is an important industry for Gibraltar, which is well-placed to offer vessels re-fuelling as they pass through the straits. In June 2013, the Spanish Environment Ministry sent a letter to one company alleging that it was in breach of Spanish law and threatening sanctions, which prompted a diplomatic protest from London.[40] Spain disagreed with the UK's protest, but has not pursued a case against the company and Mr Lidington told us that this was a case of effective and robust diplomatic action.[41]

Border delays

32. Unlike Spain, Gibraltar is not part of the Schengen open border agreement. The UK opted out of joining the main parts of Schengenwhen it was brought under the umbrella of the EU institutions in 1997,which ensured that the UK and Gibraltar maintain an external border. This means that Spain and Gibraltar are both entitled to carry out proportionate checks on travellers and vehicles crossing the border.However, Spanish border controls regularly result in extended traffic delays for those going in and out of Gibraltar and are a source of regular antagonism between the Gibraltarian government and Spain. The delays not onlycause enormous inconvenience to Gibraltarians but also affect the seven to ten thousand Spanish citizens who cross the border every day to work in Gibraltar.

33. In July and August 2013, Spain suddenly instigated rigorous border checks that resulted in motorists waiting up to seven hours to cross the border, as each car was thoroughly searched. The queues peaked on the weekend of 27-28 July, and again on 9-10 August. These delays followed shortly after Gibraltar's installation of the artificial reef in BGTW, and many observers, including the Governments of Gibraltar and the UK, consider the timing to have beenpolitically motivated. Mr Picardodescribedthe delays to be another example of what he termed "the use of the frontier as an abusive weapon against Gibraltar and its economy".[42]

34. Spain stated that the delays were due to measures it had been forced to take to prevent tobacco smuggling across the border.Foreign Minister Jose Manuel Garcia-Margallo said at the time that Spain was considering introducing more formal restrictions, including a €50 fee to cross the border, and that Spain could close its airspace to flights heading to Gibraltar (the European Commission quickly warned Spain that a €50 fee at the border would be illegal).[43]In an article published in the Wall Street Journal in August 2013 titled 'We need to talk about Gibraltar', Mr Margallo listed Spain's criticisms of Gibraltar, including the installation of concrete blocks, the fishing dispute, smuggling, and Gibraltar's tax regime.[44]

35. The UK government formally protested about the delays. It summoned the Spanish Ambassador on 2 August; the Foreign Secretary spoke to his Spanish counterpart on 7 August; and the Prime Minister phoned Prime Minister Rajoy on7 August. As delays continued the following weekend and throughout August, the Prime Minister called the President of the European Commission to request an urgent EU monitoring mission to inspect the border.


36. The European Commission conducted a one-day visit to the border on 25 September 2013.The Commission had investigated Gibraltar border delays before, in 2002. In that case, it issued contradictory responses, first announcing that the checks at the border "could not be proportionate to the legal and practical objectives that are intended to pursue", but then closing the investigation and stating that it had found no evidence to legallysupport claims that the checks were disproportionate.[45] This time, the Commission announced on 15 November 2013 that it had"not found evidence to conclude that the checks on persons and goods as operated by the Spanish authorities at the crossing point of La Línea de la Concepción have infringed the relevant provisions of Union law." However, it added:

    The management of this crossing point is nevertheless challenging, in view of the heavy traffic volumes in a relatively confined space and the increase in tobacco smuggling into Spain. The Commission believes that the authorities on both sides could take further measures to better address these challenges, and is addressing three recommendations to both Member States.

    In its letter to Spain, the Commission recommends: 1) to optimise the physical space available on the Spanish side of the crossing point in view of ensuring a greater fluidity of traffic (and in particular to review the traffic organisation on entry into Spain and on exit from Spain in order to increase the number of vehicular lanes for travellers or to make better use of the existing lines); 2) to optimise risk-based profiling: carrying out more targeted checks, based on a refined risk analysis, in order to reduce the large amount of random border controls and 3) to develop the exchange of information with the United Kingdom on tobacco smuggling.

    In its letter to theUnited Kingdom, the Commission recommends: 1) to develop risk-based profiling (in particular Gibraltar should ensure non-systematic and risk analysis-based checks on travellers and their belongings upon exit from Gibraltar at the crossing point of La Línea de la Concepción); 2) optimising legislation and safeguards in view of contributing to an efficient fight against tobacco smuggling and 3) develop the exchange of intelligence on tobacco smuggling with Spain.[46]

The Commission encouraged all of the relevant authorities to co-operate and engage in "constructive dialogue". It said it would continue to monitor the situation and asked toreceive information from both authorities within six months on how the recommendations had been taken into consideration.

37. Both Spain and the UK welcomed the Commission's findings. Spain said it was satisfied that the Commission had found that its checks were not illegal,[47] while Mr Lidington, Minister for Europe, welcomed the Commission's recommendations to Spain for changes to its side of the border, which he described as "strong", and said that the UK and Gibraltarian governments had been calling for such measures for years. However, headded:

    It is unsurprising that the Commission found insufficient evidence that Spain is breaking EU law, as the Spanish checks were significantly reduced during the Commission's visit.We remain confident that the Spanish government has acted-and continues to act-unlawfully, through introducing disproportionate and politically motivated checks at the Gibraltar-Spain border. And we will continue to provide evidence of that to the Commission.[48]

The visit was announced in advance, in accordance with the then Schengen Border Code. These rules have recently been updated and it is now possible for European Commission experts to make border visits with only 24 hours' notice.[49]The Government of Gibraltar, in consultation with the UK, immediately published the letter it had received from the Commission. The Spanish Government did not. Following an official 'access for documents' request by the then MEP for Gibraltar, Sir Graham Watson, the Commission published the letter it had sent to Spain. However, it has refused a second 'access to documents' request for a further letter it sent to Spain about the border on 19 December 2013.

38. In the six months since the Commission sent recommendations, the Gibraltarian government states that it has taken a number of measures to implement the recommendations, which were mostly aimed at curbing tobacco trafficking, including:

·  increasing powers of authorities to tackle smugglers;

·  upgrades to the border infrastructure to make smuggling more difficult;

·  reducing the number of cigarettes that an individual can buy and carry;

·  raising duty on tobacco[50]

In April 2014, the Government of Gibraltar submitted to the Commission a collection of evidence of border delays, including testimonials from 500 affected citizens. On 15 May 2014, David Lidington publicly criticised Spain for its failure to implement the Commission's recommendationsand continuing "politically motivated and disproportionate checks" at the border, commenting:

    I am deeply concerned by the delay by the authorities in Spain in responding to the Commission's recommendations. The Commission has already concluded that the intensity of the checks is unjustified. Spain needs to take simple, practical steps to improve the situation - and quickly.[51]

On 16 May, it was reported that Spain had written to the European Commission to say that the UK had failed to adopt the necessary measures to curb tobacco smuggling, which had further increased, and Spainplanned to intensify controls at the border. It also promised a €5.3 million upgrade to its border facilities.[52] Spain also claimed that cooperation with Gibraltarian authorities had actually deteriorated over the six months since the visits, that it was continuing to confiscate record levels of smuggled tobacco, stating: "This lack of cooperation in the face of an increase requires Spain to intensify controls both in the waters and at the fence."[53]

39. Although the delays have lessened since August 2013, they remain significant. At the time of our visit to Gibraltar in March 2014, the Chief Minister told us that in the previous month,cars crossing the border werewaitingon average 67 minutes to enter Gibraltar and 93 minutes to leave.[54] He added that Spain had also implemented a new measure of delaying the pedestrian queue for up to 90 minutes, stating:

    Things are not getting better, and the figures I am giving you take account of the reduced number of cars and pedestrians coming into Gibraltar. In my view and that of the Gibraltar Government, the issue at the border is not being resolved.[55]

The British Government agrees that border checks remain "disproportionate" and has promised to maintain diplomatic pressure until they return to reasonable levels. The Government of Gibraltar has provided data to the European Commission on waiting times to cross the border experienced over the last six months, which states that delays of an hour or more for traffic leaving Gibraltar took place on at least 20 days each month between November 2013 and May 2014, and that maximum waiting times are still reaching up to three hours for vehicles on occasion, while pedestrians have waited for up to 90 minutes to cross the border:

Charts showing maximum waiting times at the border Jan-Jun 2014

40. It is not only Gibraltarians that are affected by the border delays: up to 10,000 Spanish nationals cross the border to work in Gibraltar each day.The area on the Spanish side of the border has experienced high levels of unemployment and poverty, and many of its residents depend on work and business from Gibraltar.We received representations from Spanish Workers in Gibraltar (ASCTEG) and For a Humanitarian Frontier,an organisation which defends the rights of commuters who cross the frontier of Gibraltar and La Linea on a daily basis "who suffer unnecessary, unjustified and in an inhumane way, the long lasting queues because [of] the use of the frontier as a political weapon".[56]The local government in Andalucia, led by Socialist (PSOE) party, has also protested about the restrictions. The local Andalusian parliament passed a motion in May 2014 that called on the Spanish government to relax controls at the border which were adversely affecting Spanish workers crossing daily into Gibraltar. The motion was passed with the support of the Socialist and left wing parties, who reportedly claimed that the controls had had a disastrous effect on businesses on the Spanish side of the border. The press reported that the PP government in Madrid considered the motion to go against Spanish national interests.[57]The press reported in May 2014 that Susana Diaz, the PSOE president of the Junta de Andalucia, had written to Spain's central government urging it to ease controls that had become a "heavy burden" for cross-border workers.[58]The opposition PSOE has previously criticised the Spanish Government for its policies toward Gibraltar, accusing it of "starting a conflict without a solution" and describing "sad outcomes" for the local region.[59]


41. Tobacco smuggling does take place across the Spain/Gibraltar border and has soared following the financial crisis and unemployment in Spain.Spain claims that seizures of illegally imported cigarettes from Gibraltar increased by 213% between 2010 and 2012.[60]Mr Margallo told Spain's own Foreign Affairs Committee in September 2013 that the number of cigarettes imported into Gibraltar was so high that it was not possible that they were for domestic consumption only:

    55 million packs of cigarettes were imported to Gibraltar from Spain in 2009; in 2010 this rose to 86 million packs; in 2011, to 117 million, in 2012, to 139 million, and in 2013, in six months and even when controls had been implemented, 93 million packs. This suggests if action had not been taken, well over 200 million packs would have been imported. Bearing in mind that Gibraltar has some 30,000 inhabitants, and ruling out the children, non-smokers and others who are not involved in this trade, it is clear that the numbers do not add up.[61]

Spain claims that these cigarettes are smuggled back into Spain for sale, tax-free, via cars, pedestrians and on the water.

42. Chief Minister Picardo acknowledges that tobacco smuggling is a problem and states that his government has put in place "draconian" measures to tackle it.[62] These measures include restricting the amount of tobacco that people can be in possession of without a transportation licence, and the amount of tobacco that can be sold to an individual; restricting the areas where tobacco can be sold; and extending police powers to stop and search cars suspected of smuggling tobacco.However, he also argues that tobacco smuggling is a problem throughout southern Spain and the problems on the Gibraltar border are minimal in comparison with elsewhere. He also claims that Spain ignores the fact that:

    Gibraltar has 12 million tourists every year, a lot of cross- frontier workers and 12 million tourists in total. When you look at the numbers of cartons of cigarettes that are sold in Gibraltar, they are less than one carton per tourist that comes to Gibraltar.[63]

Chief Minister Picardo also argues that Spain is using the tobacco smuggling as a smokescreen for punitive measures against Gibraltar:

    Gibraltar is doing its bit to control the legitimate aspect ofthe concerns that there may be about cross-frontier tobaccotrade. None of that is recognized. Although our laws are muchtougher than the laws in Andorra, et cetera. And it's notrecognized, for example, that Gibraltar arrests and prosecutespeople on a daily basis for breaching our Tobacco Act. But,when you look at the numbers all of this is completelydeminimis compared to the number in Algeciras, in Valencia,Barcelona, et cetera.But, of course that doesn't matter when you want to usepolitical rhetoric to damn a particular territory.[64]


43. One possible solution to the border delays is to remove the border altogether, by allowing Gibraltar to join Schengen while the UK remains outside. Since we took evidence from the Chief Minister, he has announced the beginning of a consultation process on Gibraltar's status in the EU, which will explore the possibility ofmembership of Schengen and the Common Customs Union.[65]Although this consultation is at a very early stage, we can see the merits of this idea. It would eliminate one of the main mechanisms for applying pressure to Gibraltar and would make little difference to the rest of the UK, as Gibraltar is not currently part of a travel arrangement that bypasses UK borders anyway. It could also create goodwill both across the border and in the EU more widely. We must acknowledge that at present the UK might find few friends in Brussels who will sympathise about lengthy border delays in Gibraltar; as one of the only states in Europe not to be part of Schengen, the only time most Europeans encounter border checks in Europe is when they enter the UK. Gibraltar's accession to Schengen couldtherefore be one potential means of neutralising this long-standing and major irritant.

44. When we asked Mr Lidington if the UK Government would consider the possibility of Gibraltar joining Schengen he said that he could envisage the scenario, and commented:

    As a matter of political principle, I would not object to Gibraltar being more closely integrated in some elements of the EU acquis if that was what Gibraltar wanted. My caveats would be first that this would involve a negotiation, at minimum. Secondly, it might well require changes to the European treaties, because at the moment […] the treaties lay down which elements of the acquis apply to Gibraltar and which do not.[66]

Spain has not formally commented on how it views the idea of Gibraltar joining Schengen. We suspect that the legal difficulties will be substantial. Joining Schengen is a major step with political and economic implications for Gibraltar that require very careful consideration. In its response to this report, theGovernment should state its position on whether Gibraltar could join Schengen without the rest of the UK,and how it will support the work of the recently-announced consultation.


45. Tensions between the UK and Spain over the Gibraltar border were further inflamed in November 2013 when Spanish officials opened two UK diplomatic bags at the border with Gibraltar. According to the Vienna Convention of 1961, diplomatic bags cannot be opened without authorisation from the sending country. The incident prompted an outcry from the UKGovernment, which said it was the first example of such a breach of diplomatic protocol by one EU state on another. The Foreign Office sought an "urgent explanation" from Spain. Mr Lidington later told the House that Spain had explained that it was "an error at a junior operational level at the crossing point between Gibraltar and Spain and a more senior official put a stop to that interference as soon as he realised what had happened" He added that Spain had promised not to repeat its interference.[67]However, reports in the press pointed out that Mr Margallo had nonetheless told reporters that the bag was "not technically diplomatic bags", adding "If it is not a diplomatic bag, there is no diplomatic incident."[68] This account was rejected by the British Government, which said that "There is and should have been no doubt that these bags were the property of Her Majesty's Government, that they were marked as such, and that tampering with the bags was a breach of these principles."[69]

46. We are in no doubt that Spain's measures at the border in 2013 were politically motivated and that it continues to use the border as a coercive tool against Gibraltar. This is entirely unacceptable behaviour by an EU partnerand should not be tolerated by the UK.The Government should continue to pursue a stronger response by the European Commission through consistent and sustained follow-up in Brussels. The Government should also encourage further monitoring inspections by the Commission with the minimum possible notice given to both parties.

International pressure

47. In addition to its bilateral measures against Gibraltar, Spain has also sought to enlist international allies. In August 2013, the Spanish media reported that Spain was considering partnering with Argentina to take action against the UK in the UN or even the International Court of Justice.[70] Since then, a town in Spain (Algeciras) announced it would be 'twinned' with one in Argentina (Rio Grande) as part of an Argentine-led initiative to highlight British "occupation" of the Falklands and Gibraltar (though Algeciras' mayor was criticised in Spain for making the agreement without consulting local authorities).[71]Spain has also used international and multilateral forums to press its case against Gibraltar, and to use their mechanisms to exclude Gibraltar or otherwise bring pressure to bear on the territory:


48. The EU infamously has an "allergy" to sovereignty disputes and tries to avoid becoming involved in them. Spain has nevertheless tried, with some success, to use EU institutions to complain about or exclude Gibraltar. It has most recently done this in the case of the EU's aviation legislation, despite its commitment not to use this measure under the Cordoba Agreement.

Withdrawal from Cordoba Agreement

49. The 2006 Cordoba Agreementresolved a number of important issues for both Gibraltar and Spain, including pensions, communications, and aviation (see paras 10-11, above). In 2013, however, Spain informed the UK that it would no longer comply with one of its Cordoba Agreement commitments relating to aviation, and would once again seek to exclude Gibraltar from EU aviation legislation.[72] This is significant because if Gibraltar is excluded from EU aviation legislation it potentially limits the use of its airport (which was expensively upgraded following the Cordoba Agreement) and restricts the number of airlines that will use the airport. Over the last year Spain has repeatedly opposed the inclusion of Gibraltar in new aviation legislation. Mr Lidington told us that the UK had fought back in 2013 by threatening to veto a proposed EU-Ukraine aviation agreement if Spain tried to exclude Gibraltar from it.[73]We note that the European Scrutiny Committee has asked the Government for further information on the EU-Ukraine aviation agreement because it is concerned about the Gibraltar issue. The Committee concluded that "We understand that Spain appears reluctant to accept the Agreement as it stands. So we are keeping the documents under scrutiny pending further information on the situation."[74]However, Spanish MEPs succeeded in March 2014 in amending draft legislation for the Implementation of the 'Single European Sky', which will harmonise air traffic over Europe, to exclude Gibraltar.[75] This legislation is not yet finalised; it is subject to further consideration and negotiation between the European Parliament and the Council of the European Union.

50. Mr Picardo pointed out Spain has thereby withdrawn from its side of an agreement under which the UK has paid over £70m in pensions: "Spain resiled from the agreement, but the British taxpayer—rightly, because the United Kingdom performs on its agreements—continues to pay."[76]Spain has also threatened to withdraw from other aspects of Cordoba, though it has not yet done so. Cordoba is a non-binding agreement, which is not enforceable in international law, but the UK Government has assured Parliament that it would do all it could to hold Spain to its other commitments under the Cordoba Agreement.[77] The Government has also emphasised that it is against Spain's "importation" of the Gibraltar dispute into the mechanisms of EU institutions more generally. Mr Lidington told us:

    Certainly when it comes to European Union negotiations, the standing instructions from the Foreign Secretary and me are that officials in UKRep and elsewhere are to be very alert for any attempt to exclude Gibraltar or adversely affect Gibraltar in the terms of European Union law as it is being drafted.[78]

51. We are particularly concerned by Spain's withdrawal from some aspects of the Cordoba Agreement, representing a significant backward step in relations with Gibraltar, and the UK. As Spain tries to apply pressure via EU aviation legislation, the UK Government should ensure that its EU partners are fully aware that Spain has reneged on an agreement negotiated in good faith, under which the UK has paid over £70 million to Spanish citizens. By continuing to abide by its obligations under the Cordoba Agreement, the UK Government has put itself in a strong position to give weight to this argument.


52. Spain has sought to use the United Nations to advance its arguments about Gibraltar's sovereignty. Spain considers the dispute to be one of ending colonial power in foreign territories, and cites a number of UN resolutions on Gibraltar, secured in the 1960s and 1970s,in support of its arguments. In an address to the Spanish Foreign Affairs Committee, Mr Margallo said that these Resolutions made three key points: that that Gibraltar is "a non-self-governing territory that is subject to decolonisation"; that such decolonisation should be in accordance with the principle of territorial integrity and not that of self-determination; and that it should be achieved by means of bilateral negotiation.[79] The UK disputes all three of these points, noting particularly that Gibraltar is a self-governing territory with a constitution, legislature and government.

53. It is also notable that despite these arguments, Spain also maintains its own Overseas Territories in North Africa, Ceuta and Melilla.These two separate territories are located on Morocco's north coast and have been a source of tension between Spain and Morocco, which claims the territories as its own.Spain insists that their case is different to that of Gibraltar, as Ceuta and Melillaare an integral part of Spanish territory and have the same status as semi-autonomous regions as those on the mainland, whereas Gibraltar is not constitutionally part of the UK and, it argues, has been recognised as a "colony".Spain's claims on Gibraltar are undermined by its defence of its own overseas territories in North Africa.The Spanish Government's arguments about the constitutional differences between Ceuta and Melilla and Gibraltar are unconvincing at best, and leave Spain open to the charge of hypocrisy.

11   "Britain rejects Spanish request for Gibraltar talks", Reuters, 20 August 2013 Back

12   "We Need to Talk About Gibraltar", The Wall Street Journal, 19 August 2013 Back

13   Ibid Back

14   Q23 Back

15   Q58 Back

16   Q115 Back

17   Q115 Back

18   Q189 Back

19   HL Deb, 18 June 2014,Col WA64 Back

20   Q105 Back

21   Why are we still arguing about Gibraltar?, Channel 4 News, 5 August 2013 Back

22   Gibraltar Chronicle, 7 March 2013 Back

23   Spanish Parliament, Report of Proceedings of the Congress of Deputies Committees, Foreign Affairs, Session No.17, 3 September 2013, 10th Parliamentary term N. 392. A courtesy translation of this statement was supplied by the Embassy of Spain. Back

24   HC Deb, 2 September 2013, col 11WS Back

25   Spanish Parliament, Report of Proceedings of the Congress of Deputies Committees, Foreign Affairs, Session No.17, 3 September 2013, 10th Parliamentary term N. 392. A courtesy translation of this statement was supplied by the Embassy of Spain. Back

26   Q99 Back

27   Q101 Back

28   Q105 Back

29   HC Deb, 10 Apr 2014, Col 374W


30   Bunkering is the process of supplying fuel to a ship for its own use Back

31   Q103 Back

32   "UK protests after 'shots fired at jet skier' off Gibraltar", BBC News, 25 June 13  Back

33   HC Deb, 4 November 2013, col 3WS Back

34   "Spain to intensify border controls", GBC news, 16 May 2014 Back

35   HC Deb, 20 November 2013, col 1234 Back

" 36   "Gibraltar: UK to protest against actions of Spanish warship that disrupted British military training", The Telegraph, 19 February 2014 Back

37   See, for example, "Gibraltar: Spanish government 'hypocrites' for complaining about reef", The Telegraph, 6 August 2013, and "Gibraltar row: Spain 'misinformed' over artificial reef", Guardian, 22 August 2013 Back

38   HC Deb, 2 September 2013, col 11WS Back

39   HC Deb, 19 November 2013, col 282WH Back

40   HL Deb, 24 March 2014, col 71W Back

41   Q142 Back

42   Q87 Back

43   Q87 Back

44   "We Need to Talk About Gibraltar", The Wall Street Journal, 19 August 2013 Back

45   Eleventh Report of Session 2001-02, Gibraltar, HC 973 Back

46   "Commission reports on the border situation in La Línea (Spain) and Gibraltar (UK)", European Commission press release IP/13/1086, 15 November 2013 Back

47   "Spanish border checks on Gibraltar not illegal, EU says", euobserver, 18 November 2013 Back

48   "UK welcomes Commission's statement on Gibraltar-Spain border", Foreign and Commonwealth Office press release, 15 November 2013 Back

49   COUNCIL REGULATION (EU) No 1053/2013 establishing an evaluation and monitoring mechanism to verify the application of the Schengen acquis and repealing the Decision of the Executive Committee of 16 September 1998 setting up a Standing Committee on the evaluation and implementation of Schengen, 7 October 2013; Official Journal of the European Union L 295/27, 6 Nov 2013 Back

50   "Gibraltar-Spain border delays: EU Recommendations six months on", Foreign and Commonwealth Office press release, 15 May 2014 Back

51   "Gibraltar-Spain border delays: EU Recommendations six months on", Foreign and Commonwealth Office press release, 15 May 2014 Back

52   "Spain to intensify border controls", GBC news, 16 May 2014 Back

53   "Spain hits back at Britain over border smuggling", Gibraltar Chronicle, 18 May 2014 Back

54   Q110 Back

55   Q110 Back

56   Spanish Workers in Gibraltar(ASCTEG)/For a Humanitarian Frontier (GIB0004) Back

57   "PSOE motion upsets Partido Popular", 8 May 2014 Back

58   "Lunchtime queues as Spain steps up border checks", Gibraltar Chronicle, 21 May 2014 Back

59   "PSOE slams Spanish government over 'conflict without solution'", Gibraltar Chronicle, 1 April 2013  Back

60   "We Need to Talk About Gibraltar", The Wall Street Journal, 19 August 2013 Back

61   Spanish Parliament, Report of Proceedings of the Congress of Deputies Committees, Foreign Affairs, Session No.17, 3 September 2013, 10th Parliamentary term N. 392. A courtesy translation of this statement was supplied by the Embassy of Spain Back

62   Transcript of "A Conversation with Fabian Picardo", 7 October 2013, Council on Foreign Relations  Back

63   Ibid. Back

64   Ibid.  Back

65   "Picardo announces consultation on Schengen and Customs Union", GBC News, 9 May 2014 Back

66   Q136 Back

67   HC Deb, 27 November 2013, cols 261-263 Back

68   "Gibraltar bag incident: Spain 'promises no repeat', says UK, BBC News online, 27 November 2013 Back

69   "Gibraltar row: Spain vows not to open any more UK diplomatic bags", The Guardian, 27 November 2013 Back

70   "Falklands and Gibraltar: Spain considering a joint front with Argentina at UN, says Madrid media", MercoPress, 12 August 2013 Back

71   "Spanish and Argentine towns twin in protest over Falklands and Gibraltar", The Telegraph, 2 April 2014  Back

72   HL Deb, 11 February 2013, col 107W Back

73   Q152 Back

74   European Scrutiny Committee, First Report of Session 2014-15, Documents considered by the Committee on 4 June 2014, HC 219-I Back

75   "EU vote first step to rock exclusion from aviation measure", Gibraltar Chronicle, 13 March 2014  Back

76   Q114 Back

77   HL Deb, 11 February 2013, col 107W Back

78   Q152 Back

79   Spanish Parliament, Report of Proceedings of the Congress of Deputies Committees, Foreign Affairs, Session No.17, 3 September 2013, 10th Parliamentary term N. 392. A courtesy translation of this statement was supplied by the Embassy of Spain. Back

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