Effect of Brexit on Gibraltar

Gibraltar did not participate in the 1975 UK European Communities membership referendum the result of which had a direct impact on the colony. Neither did it participate in any European Parliamentary Elections between 1979 and 1999, but in 2002 legislation was passed by the British Parliament which allowed Gibraltar to formally take part in the 2004 European Parliament election as part of the South West England constituency in all subsequent European elections. Following the surprise election victory by the Conservatives in May 2015 it was announced that Gibraltar would fully participate in the proposed referendum on continuing EU membership, and this was legislated for in the European Union Referendum Act 2015. Gibraltar was unique in being the only British Overseas Territory within the European Union (EU), and hence was the only such territory with the right to vote in EU elections and the Brexit referendum.

In 2015 the Chief Minister of Gibraltar, Fabian Picardo, suggested that Gibraltar would attempt to remain part of the EU in the event the UK voted to leave,[4] but reaffirmed that, regardless of the result, the territory would remain a British overseas territory.[5] In a letter to the UK Foreign Affairs Select Committee, he requested that Gibraltar be considered in negotiations post-Brexit.[6]

Before the referendum, José García-Margallo, the Spanish minister of foreign affairs at the time, stated that in the event of Brexit, Gibraltar would not have access to the single market unless a formula giving Spain co-sovereignty were agreed for a transitional period. After the referendum, he saw the result as increasing the chance of a Spanish flag on Gibraltar.[7] He also said Spain would seek talks on Gibraltar, whose status is disputed, the "very next day" after a British exit from the EU.[8]

The European Union (Referendum) Act 2016 (Gibraltar),[9] was passed by the Gibraltar Parliament and implemented in Gibraltar after the European Union Referendum Act 2015 was passed by the UK Parliament.

During the campaign leading up to the United Kingdom's national referendum on whether to leave the European Union (known as "Brexit") the Spanish government warned that if the UK chose to leave, Spain would push to reclaim control over Gibraltar.[10] The Chief Minister of Gibraltar, Fabian Picardo, warned the UK of the threat to Gibraltar's safety posed by Brexit. All three parties represented in the legislature supported remaining in the EU during the referendum[11][12] and the Remain campaign was known as Gibraltar Stronger in Europe.

The referendum result within Gibraltar was declared early on Friday 24 June 2016 by the counting officer and Clerk to the Gibraltar Parliament Paul Martinez at the University of Gibraltar at 0040 CEST making it the first of the 382 voting areas to declare and its result was fed into the South West England regional count and then the overall national count. The result saw 95.9% of Gibraltarian voters opting to remain, on a turnout of 84%. Overall the United Kingdom voted by 51.9% to 48.1% to leave the European Union.

The day after the result, Spain's acting Foreign Minister, José Manuel García-Margallo, renewed calls for joint Spanish–British control of the peninsula.[20] These calls were strongly rebuffed by Gibraltar's Chief Minister.[21] After the result Spain reiterated its position that it wanted to jointly govern Gibraltar with the United Kingdom and said it would seek to block Gibraltar from participating in talks over future deals between the UK and EU.[22]

In April 2017, British Prime Minister Theresa May reiterated that "the UK would seek the best possible deal for Gibraltar as the UK exits the EU, and there would be no negotiation on the sovereignty of Gibraltar without the consent of its people.” [23]

In April 2018, Spanish Foreign Minister Alfonso Dastis announced that Spain hoped to sign off a bilateral agreement with Britain over Gibraltar before October so as not to hinder a Brexit transition deal. Talks between London and Madrid had progressed well. While reiterating the Spanish long-term aim of "recovering" Gibraltar, he said that Spain would not hold Gibraltar as a "hostage" to the EU negotiations.[24]

Questions were raised over the future of free-flowing traffic at the Gibraltar–Spain border.[25]

People
Gibraltar, like the UK, had been outside the Schengen Area. All people crossing the border to/from Spain have therefore always been required to go through British and Spanish border controls. There are estimates that upwards of 15,000 people live in La Línea, in Spain but work in Gibraltar. (La Línea has an unemployment rate of 35% whereas Gibraltar has a 1% unemployment rate.) [26]

Goods
Gibraltar was never part of the EU's customs union, so there were already more detailed checks on goods moving over the Spanish-Gibraltar border.[27]

Air travel
In 2017 a Spanish diplomat indicated that any agreement on airline landing rights for flights between the EU and the UK agreed during Brexit negotiations would not apply to the Gibraltar International Airport.[28] Most of the international flights using Gibraltar airport are to the UK or Morocco. There were some flights to Spanish destinations following the Cordoba Agreement, 2006, but there were none by the time of Brexit. There are no airports in mainland Spain within 50 kilometres (30 mi) of Gibraltar.[29]

Anticipating a loss of access to EU markets as a result of Brexit, the Government of Gibraltar received "a firm commitment from the United Kingdom government to maintain and broaden access to their financial markets," including "automatic access to the United Kingdom in banking, insurance, investment services and any other similar area where cross-border directives currently apply".[30]

Fintech companies like Payoneer moved their offices from Gibraltar to Ireland, the main English-speaking country left in the EU, as a result of the Brexit.[31]

On 4 March 2019, the UK and Spain signed an agreement of taxation pertaining to Gibraltar. This was the first treaty in 300 years that explicitly referred to Gibraltar. The agreement came into force on 4 March 2021 and established enhanced cooperation between Spain and the British Overseas Territory. Under the agreement Gibraltar provides Spain with regular information on those Spanish workers and assets that are registered in Gibraltar. The agreement also makes it more difficult for Spanish fiscal residents to register themselves in Gibraltar. A direct effect of this agreement was Spain taking Gibraltar off its list of tax havens.[32][33]

On 31 December 2020, Spain and the United Kingdom reached an agreement in principle under which Gibraltar would join the European Union's Schengen Area.[42] This cleared the way for the European Union and the UK to start formal negotiations on the matter.[43] Elements of the proposed agreement are:[43][44]

• Gibraltar (air)ports become entry points of the Schengen area, under responsibility of Spain [41]
• The border controls will be performed by Frontex-personnel [41] (Spain disputes this interpretation.)[45]
• unrestricted movement of goods
• arrangements in the field of "environment, the level playing field, social security coordination, citizens’ rights, data and matters related to continued document recognition" [41]
• the relationship between Gibraltar and the European Union in areas of EU competence
• Gibraltar can offer residence permit on its own decision
• Visa for visiting Gibraltar will be Schengen visas and the visa waiver ETIAS
• The arrangements are implemented for "an initial period of four years"[41]

Since Gibraltar left the EU, ad hoc arrangements have been in place.[3] Spain has granted free border passage to workers and tourists to avoid disruption, and other pragmatic cross-border bridging measures have also been applied.[46] The expected six month timetable was not followed, but on 20 July 2021 the EU commission proposed a mandate with directives for the negotiations. Formal negotiations needed the Council of the European Union to adopt the mandate in order to proceed,[47][48] and in October 2021 the Council approved the mandate allowing negotiations to begin[49] anticipating an agreement on Gibraltar.[50]

Negotiations started soon after[2] and focussed on the future status of the border.[3] No formal agreement had been reached by December 2021, and so several temporary bridging measures for mutual recognition were introduced with respect to driving licences and healthcare between Spain and Gibraltar.[51] The negotiations continued through the winter of 2021–22 and there were hopes that they would finish during the spring[52] as the objective was to conclude an agreement before Easter.[53] However, negotiations continued throughout the summer of 2022[54] and proceeded slowly, partly due to the British government crisis that took place at the time, and uncertainty remained about the timetable.[55] The reciprocal health care agreement that had been extended until 30 June 2022 came to an end. As a result it became necessary for residents of Gibraltar to purchase travel insurance in order to receive low cost emergency health care in Spain.[56]

By the end of 2022, negotiations were deadlocked over the issue of policing passport control at Gibraltar airport.[57] Talks remained stalled during 2023, with Spain insisting that its Policía Nacional control entry into the Schengen area (as is the norm on all Spanish entry points to Schengen) and the UK demanding that the work be done by Frontex officers (who elsewhere only supplement national authorities by exception).[45] Spain also sought greater controls to reduce tobacco smuggling from Gibraltar into Spain, which was estimated to cost Spain around €400 million a year in lost revenue.[58]

Concerns about the possible election of a Spanish government in 2023 that could be less sympathetic to Gibraltar's aspirations led to renewed discussion of the possible consequences of the failure of the treaty talks. This could be a continuation of the status quo or a more isolated Gibraltar hoping to benefit from low taxes and low regulation.[3] After the 2023 Spanish general election in July, talks were suspended pending the formation of a coalition government.[58]