UK signs historic treaty with EU to bring down border fence between Gibraltar and Spain

The UK government signed the historic UK-EU Treaty on Gibraltar in Brussels on 14 July. The Treaty secures border fluidity for people and goods crossing the Gibraltar-Spain border, delivers economic and trade certainty for people and businesses in Gibraltar, while maintaining the full protections of British sovereignty.

From 15 July, the treaty eliminates border controls and customs checks to create a fluid frontier, allowing for the immediate removal of the border fence that has physically separated Spain from Gibraltar since 1908. This will particularly benefit the ‘frontier workers’ who cross into Gibraltar from Spain on a daily basis.

Under the treaty, Gibraltar will be connected to the Schengen Area, without becoming part of it. Persons entering Gibraltar by port or airport will face immigration checks by Gibraltarian officials and then a Schengen check, carried out by the Spanish authorities on behalf of the Schengen Area. This includes registration under the EU’s new Entry/Exit System (EES) where it applies. This will ensure that people cleared at the airport will then be able to travel freely between Gibraltar, Spain and the wider Schengen Area.

The Agreement includes provisions on visa-free travel, residence rights for persons resident in Gibraltar, and coordinated procedures for the approval of new or renewed residence permits. These provisions allow the relevant authorities in Spain to ensure that residence permits that will allow access to the Schengen area are granted in line with key provisions of EU law designed to protect public safety and security.

Gibraltar residence will be evidenced by an ID card or residence permit. Gibraltar residents are exempt from passport control and both the Entry/Exit System (EES) and the obligation to register under the European Travel Information & Authorisation System (ETIAS). Gibraltar residents also have the right to transit through Schengen EU Member States to return to Gibraltar unless specifically excluded.

The new Treaty establishes a bespoke customs model between Gibraltar and the EU, removing tariffs, duties and quotas on goods moving between them. It delivers enhancements to Gibraltar’s existing indirect taxation system that brings certain rates closer to those in the EU, without adopting VAT or any form of sales tax.

Gibraltar’s current import duty regime will be replaced by a new Transaction Tax (TT), which will be applied initially at a transitional standard rate of 15%. This rate will be increased to 16% for year two and for year three will be aligned to the lowest standard rate of VAT being applied in the EU, which is currently 17%.

The TT will be levied at the point of importation or manufacture, or when goods are brought out of bond, rather than applied at the point of sale. The tax rate will be applied to the customs value of the goods. All revenue from the TT and excise duty will be charged in Gibraltar.

A reduced rate of 5% and a super reduced rate of 0% will apply to certain goods as listed in Annex III of the EU VAT Directive. The choice will be determined by that list. Bunkering fuel, ship supplies and goods that are not to be put up for sale in Gibraltar will be exempt from the TT and from excise duties.

If goods are imported from the UK that do not meet the UK-origin rules contained in the UK-EU Trade & Cooperation Agreement, EU Common External Tariff rates will be applied. The TT would also be applied if the goods are to be placed on the market in Gibraltar.

To achieve fluid movement across the border operationally, the majority of goods destined for Gibraltar will be cleared by EU customs offices in Spain so they can enter Gibraltar without further checks.

The Treaty defines the rights of cross-border workers, who live in Spain and work in Gibraltar or vice versa, to provide a secure framework for employment, supporting the integrated labour market between Gibraltar and the surrounding region. It provides mechanisms for social security coordination so that contributions, entitlements and benefits can be administered without disruption.

Under Article 291, frontier workers are defined as either EU citizens legally residing in the Kingdom of Spain or UK nationals legally residing in Gibraltar who pursue an economic activity as an employed person (or as a self-employed person under the respective UK and Spanish laws) either in Gibraltar or in Spain and who return at least once a week to Spain or to Gibraltar, respectively.

Frontier workers’ rights are also extended to their family members – spouses, registered partners, dependant children under 21, and dependant direct relatives – provided they also legally reside in Spain or Gibraltar respectively.

There is no direct application of EU law to Gibraltar through the Treaty or enforcement role for the Court of Justice of the EU in Gibraltar. It contains provisions confirming how Gibraltar’s domestic legal system will incorporate EU law where alignment is required and confirms it will be enforced by Gibraltar’s own authorities and courts.

To enable the necessary free flow of personal data between Gibraltar and the EU, the Treaty contains provisions of the Treaty operationally viable, without the need for a data ‘adequacy’ decision for Gibraltar, in return for Gibraltar’s continued alignment with key EU data protection rules.

The Treaty also includes commitments to ensure a level playing field as regards State aid, tax transparency, labour standards, trade, sustainable development, anti-money laundering and transport. It further provides for adaptation to EU environmental law to ensure compliance with EU environmental standards and for the creation of a joint environmental impact assessment mechanism.

The Treaty was signed in the presence of the Chief Minister of Gibraltar Fabian Picardo and the Spanish Foreign Minister Jose Manuel Albares and had the unanimous backing of the Gibraltar Parliament. The government of Gibraltar was at the heart of negotiations throughout.

Gibraltar was left out of the UK-EU Trade & Cooperation Agreement following Brexit, creating the prospect of a ‘hard border’ for the 15,000 people – over half of Gibraltar’s workforce – who cross the land border between Spain and Gibraltar every day.

The new Treaty delivers practical solutions to avoid the need for onerous checks and lengthy delays at the border, providing certainty for people and businesses in Gibraltar, and opens new opportunities for flights and economic growth. It also safeguards British sovereignty and protects the autonomous operation of UK military facilities.

“This historic agreement delivers certainty for the people and businesses of Gibraltar, protects British sovereignty, our military facilities, and has the full backing of the government and parliament of Gibraltar,” said UK Minister for Europe, North America and Overseas Territories Stephen Doughty.

“Gibraltar has been at the heart of these negotiations throughout. A cherished part of the British family, its economic future and thousands of jobs depended on finding a practical solution to the challenges created by Brexit. Our support for Gibraltar remains as solid as the Rock. This agreement opens a new chapter with the EU and Spain, supporting jobs, growth and prosperity on both sides of the border.”