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“Gibraltarians have come into their own”

Journalist Helen Wade reflects on her home territory and its relationship with the two countries that have been in dispute over the Rock’s sovereignty since the early 18th century

My favourite meal as a child growing up in Gibraltar was “tortilla de patatas” (Spanish, potato omelette) with a dollop of tomato ketchup and baked beans. As an adult I’m still partial to this curious, Anglo-Spanish, culinary combination, which perfectly encapsulates the hybrid nature of the Gibraltarians. Fiercely British with a strong, Mediterranean influence, all aspects of life on the Rock of Gibraltar – from the “llanito” mishmash of English and Spanish spoken everywhere to the local traditions and way of life – feel just as curious a mix as that plate of tortilla and baked beans.

It’s now more than 300 years since Spain lost the war of succession to an Anglo-Dutch force and signed the Treaty of Utrecht in 1713, which handed Britain the sovereignty of Gibraltar “in perpetuity”. But it seems Spain has never really got over losing this rocky outcrop on its southernmost tip. Unbelievably, most Spaniards I’ve met consider it a matter of national pride that Gibraltar should one day return to Spain. Politely pointing out that the Rock and the Gibraltarians have been British for longer than the United States has been American is not music to Spanish ears.

Gibraltar has been an intractable stumbling block for countless Spanish and British governments, who’ve found their diplomatic skills tested to the limit in repeated attempts to solve their differences over this political hot potato. In the world of realpolitik neither Madrid nor London, two significant players in the EU, want a historic spat over a territory little more than 2.5 square miles to stand in the way of trade interests and political alliances in a global context.  

The defining era in Gibraltar’s modern, political history began in 1969 when the Spanish dictator, General Francisco Franco, decided to close the border with Gibraltar. In an added, cruel twist, all postal, telephone and maritime links with Gibraltar were severed as the Generalissimo hoped Gibraltar would “fall like an over-ripened fruit.” But the Rock and its people had withstood long sieges throughout history and survived. This was to be no different.

During the 16 long years that the frontier remained closed, a typical Sunday afternoon would usually involve a ride out in the family car, driving round and round the Rock’s narrow roads like a life-size Scalextrix. We could only go as far as “la frontera” - the border with Spain. Some families would pitch up, sitting on fold-away chairs, chatting and having a picnic tea. I once spotted a neighbour knitting on a deckchair next to the padlocked gates. 

About 50 metres away from us, stood my Spanish grandparents, aunt, uncle and two cousins. Binoculars were essential and we’d communicate as best we could – by shouting loudly at each other across the empty space between the two locked gates. Swapping snippets of news at the top of our voices, hoping they’d hear us. Visiting family in Spain involved two ferries and two continents for a journey of less than two nautical miles.    

The pain of years of enforced separation left its mark on Gibraltarian and Spanish families like mine. After so many years of being cut off with only a stick and no carrot from our neighbours to the north there was anger, bitterness and suspicion of Spain and all things Spanish. Gibraltarians came together, with a reinforced Britishness as a carapace. Britain was the life-support machine that ensured Gibraltar survived this modern-day siege. All supplies were flown from London and Morocco, and the Spanish workforce that disappeared – literally overnight – was replaced by Moroccan labour.  

I grew up happily watching Spanish and English TV programmes, laughing at English and Spanish jokes, eating turrón and mince pies at Christmas with that duality of culture that is so typically Gibraltarian. 

We didn’t have a “National Day” when I was growing up. Throughout the 60s and 70s Gibraltar was still unashamedly a British colony, before the word colony became politically unpalatable. No-one seemed to mind then, it’s just the way things were. A large proportion of the – admittedly not very big – territory was the sole preserve of the Ministry of Defence and therefore out of bounds for the locals

After Spain fully reopened its border with Gibraltar in 1985 – just before Spain joined the EU - it took a good 20 years for cross-border relations to thaw out. Growing numbers of Gibraltarian families bought or rented Spanish property, a new generation socialised with their Spanish neighbours, trade links were renewed, thousands of Spanish workers found jobs in Gibraltar, couples from both sides of the border, fell in love and got married, just like my parents had done thirty years earlier. As the two “sides” became closer, so did the politicians. Tripartite talks between Spain, Britain and Gibraltar led to the “Cordoba Agreement” in 2006 establishing a forum for areas of cross-border co-operation.  

Then last July, things suddenly went pear-shaped. Almost overnight there were queues of up to seven hours to get in and out of Gibraltar. This time the trigger was an artificial reef. Spain objected to the Gibraltar government’s decision to drop 70 concrete blocks in the sea near the isthmus to preserve marine stocks. The Spanish fishermen, who frequently ventured into Gibraltar waters for their day’s catch, were not best pleased. Spain, often accused of using the border with Gibraltar as a choke-hold, said the lengthy queues were a result of increased customs checks to prevent tobacco smuggling into Spain.  

As the summer temperatures soared, so did the heated exchanges between Downing Street and La Moncloa with frequent salvos in yet another diplomatic war of words. 

In a matter of weeks, the rapprochement built up by neighbouring communities in the last 25 years, quickly evaporated. Animosity grew and Gibraltarians reported feeling unsafe and uncomfortable going to Spain after reports of vandalism to Gibraltarian cars parked on Spanish streets. People chose not to go to Spain if they could avoid it and spent their money on the Rock. The knock-on effect on neighbouring Spanish supermarkets and restaurants was quickly felt too, with as much as a 65 per cent drop in takings. Nine months on, the border queues remain and the political impasse shows no signs of being broken.  

Regardless of the centuries-old wrangling over sovereignty with Spain, Gibraltar is now more than ever the Rock of the Gibraltarians. A British Overseas Territory with a population of 30,000 who’ve matured as a people with a very clearly defined sense of cultural identity and purpose. Nowhere is this more palpable than on National Day, September 10th, when the red and white Gibraltar flag with the emblematic castle and keys, is everywhere and llanitos take to the streets in a sea of red and white to celebrate their coming of age as a people. This nationalism, underpinned by a new constitution in 2007, has gained a momentum all of its own, free from the mental shackles of colonialism.  

Key to this has been the diversification of Gibraltar’s economy from a heavy dependence on the British military (once the largest local employer alongside the civil service) towards new business sectors such as – online gaming, bunkering, tourism, all bringing jobs and wealth creation to the Rock. The highly-regulated, finance centre has flourished and is now one of the central pillars of a healthy economy that grew 8 per cent last year with a low unemployment rate – around 2 per cent - that’s the envy of other crisis-ridden economies in Europe.

This burgeoning nationalism was cemented in the years following the 2002 referendum on joint sovereignty proposals by the Blair government when 98 per cent of Gibraltar’s population voted to remain British. Sharing sovereignty with Spain? British Gibraltarians were never going to buy that and the proposals were kicked into the long grass. 

In the 23 years I’ve lived away from my homeland, Gibraltarians have come into their own, confidently punching above their weight for such a tiny dot on the world map. Last year they celebrated a long-held dream to join the UEFA family.

In a promotional video for the UEFA campaign, Gibraltar’s Chief Minister, Fabian Picardo, described the Rock’s future as “red, white and proud, red, white and free”. I sincerely hope that my fellow “llanitos” can confidently face their neighbours to the north and celebrate the richness and diversity of their own cultural heritage. It’s what makes the Gibraltarians such a unique, Anglo-Spanish hybrid, pretty much like the tortilla and baked beans that I now feed my bilingual children.

Photo: Getty
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Gibraltar - impact of Brexit

Last week our editor took a general overview of some of the scenarios for Gibraltar if Britain were to leave the Euro. This week, as the atmosphere in the British Conservative Party becomes ever more toxic, Michael Castiel, partner at Hassans lawyers on the Rock, goes into more detail (this piece written before the Iain Duncan Smith resignation and subsequent arguments happened).

However unlikely it may prove, the prospect of Britain's withdrawal from the EU sends shivers through Gibraltar's financial services, gaming and tourism industries, which are at the core of Gibraltar’s economy. For, if Britain leaves the EU, Gibraltar goes too, and, should Brexit occur, it is Gibraltar’s relationship with the UK that as in the past, largely will shape Gibraltar's future.

Gibraltar joined the European Union in 1973 as part of the UK. While rights to freedom of services across borders of EU member states apply between Gibraltar and the rest of the EU, because Gibraltar is not a separate member state (and is in fact part of the UK Member State) those rights do not apply between Gibraltar and the UK. Instead a bilateral agreement, formalised almost two decades ago, gives Gibraltar's financial service companies the equivalent EU passporting rights into the UK. Accordingly and pursuant to such agreement, where EU rights in banking, insurance and other financial services are concerned, the UK treats Gibraltar as if it is a separate member state.

This reliance on the special relationship with the UK is recognised by both the Government and the Opposition in Gibraltar, and when the territory (which in this instance as part of the UK electorate) goes to the polls on 23 June, the vote to remain in the EU is likely to be overwhelming. This may have symbolic significance but realistically seems unlikely to influence the outcome. In actual terms, although some non-EU jurisdictions use Gibraltar and its EU passporting rights as a stepping stone into Europe, almost 80% of Gibraltar’s business dealings are with the UK.

But whether or not Britain maintains the 'special relationship' with Gibraltar, if Brexit becomes a reality, other factors will come into play, with the ever-present Spanish Government’s historic sovereignty claim over Gibraltar topping the list.

Recently Spain's caretaker Foreign Minister Jose Maria Margallo went on record that if the UK voted to leave the EU he would immediately 'raise with the UK the question of Gibraltar.' If this was to come about it could take one or more of several different forms, ranging from a complete closure of the border between Spain and Gibraltar, demanding that Gibraltar passport-holders obtain costly visas to visit or transit Spain, imposing more stringent border controls, or a frontier toll on motorists driving into or out of Gibraltar. The latter idea was in fact floated by the Spanish Government three years ago, but dropped when the EU Commission indicated that any such toll would contravene EU law.

Here, again, imponderables come into play, for much will depend on which political parties will form the next Spanish government. A Spanish government headed by the right wing PP party is likely to take a less accommodating attitude towards Gibraltar (the Foreign Minister having recently indicated that in case of Brexit the Spanish Government may opportunistically push once again for a joint sovereignty deal with the UK over Gibraltar) whereas a left of centre coalition will likely adopt a more pragmatic and cooperative relationship with Gibraltar in the event of EU exit.

The most significant changes to Gibraltar's post-Brexit operation as an international finance centre are likely to be in the sphere of tax, and while Gibraltar has always met its obligations in relation to the relevant EU rules and Directives, it has also been slightly uncomfortable with aspects of the EU's moves towards harmonisation of corporate taxes across member states.

Although it was formed as a free market alliance, since its inception fiscal matters have been at the root of the EU, but Gibraltar's 'special relationship' with Britain has allowed considerable latitude in relation to what taxes it imposes or those it doesn't. However, as is the case with other member states, Gibraltar has increasingly found in recent years its fiscal sovereignty eroded and its latitude on tax matters severely curtailed.

As in Britain, Gibraltar has benefitted from several EU Directives introduced to harmonise and support the freedom of establishment, particularly the Parent-Subsidiary Directive which prohibits withholding taxes on cross-border intra-group interest dividend and royalty payments made within the EU.

As a stepping stone for foreign direct investment, should Brexit come about EU subsidiaries could no longer rely on these Directives to allow tax-free dividend or interest payments to their holding companies based in Gibraltar. In the case of the UK, bilateral double tax treaties will no doubt mitigate the impact of the non-application of any tax related Directives. Gibraltar, however, is not currently a party to any bilateral double tax treaties. Accordingly, Gibraltar would either have to seek from the UK the extension of all or some of the UK’s bilateral tax treaties to Gibraltar (subject of course to the agreement by the relevant counterparties) or it would need to negotiate its own network of bilateral double tax treaties with a whole series of EU and non EU Member States. To say the least, neither of these options would be straightforward to implement at short notice and would need the wholehearted support of the British Government

Whilst Gibraltar’s economy is likely to be adversely affected should Brexit occur, there may be some potential benefits. An EU exit would result in fewer regulations and possibly may provide Gibraltar with greater exposure to emerging economies.

From a tax perspective, an EU exit would probably enable Gibraltar to introduce tax rules and incentives that are contrary to EU tax laws and would provide the Gibraltar Government more freedom to adopt competitive tax regimes that may be considered contrary to EU state aid rules. How possible or effective any such strategy would be is doubtful given the OECD driven anti-tax avoidance climate affecting all reputable jurisdictions whether within or outside the EU.

In this as well as other possible change much will hinge on any post-Brexit relationship with the UK - an issue which the Gibraltar Government addressed recently in a paper sent to Westminster's Foreign Affairs Committee. It stressed not only that 'EU membership has been an important factor in the development of Gibraltar’s economy' but also the importance of 'clarity as to the rights the British Government will protect and defend for Gibraltar in the context of its own negotiations.'