Britain’s new ambassador in Madrid was forced into an embarrassing apology yesterday after a Royal Navy vessel was spotted off Gibraltar using ‘a Spanish flag’ for target practice.

Crew on a Guardia Civil patrol boat said they saw British navy personnel firing at a buoy fitted with what looked like the Spanish flag.

The Spanish Government reacted furiously and summoned Ambassador Giles Paxman to provide explanations to Luis Felipe Fernández de la Peña, the director for Europe and North America at the Ministry for Foreign Affairs.

Mr Paxman explained that the flag in question was in fact a NATO numeral flag used to signal the number one. It was used as a target because its vibrant colours stand out against a blue background.

But the NATO flag – red with a horizontal yellow band - is also virtually indistinguishable from the Spanish one.

A spokesman for the Ministry for Foreign Affairs told the Chronicle that Mr Giles had apologised “for the error of judgement and the lack of sensitivity” shown by the navy crew. He said the ambassador had also promised to investigate the incident and hold people accountable if necessary.

Yesterday evening Spanish Foreign Minister Miguel Angel Moratinos said he considered the matter “fully clarified”.

The British embassy in Madrid did not comment and instead referred journalists to the Spanish ministry.

In Gibraltar, a spokesman for the Ministry of Defence confirmed that a unit from the Royal Navy’s Gibraltar Squadron had carried out a live firing practice in international waters last Tuesday.

“We can also confirm that an internationally-recognised Numeral One flag was being used to mark the target buoy,” he said.

“The Numeral One flag will no longer be used in this way on future squadron exercises.”

Although the incident occurred around seven miles from Rock, it comes at a time when tensions are high over Gibraltar’s three-mile territorial waters, which are the subject of both political and legal rows.

Earlier this week an association of Guardia Civil officers, the Asociación Unificada de Guardias Civiles [AUGC], said crews on Guardia Civil patrol boats were now in “permanent conflict” with their British counterparts

in the waters around Gibraltar.

Officials here insist that both the Royal Navy’s Gibraltar Squadron and the Royal Gibraltar Police adopt a restrained, though nonetheless firm approach to patrolling around Gibraltar.

The aim is to prevent incursions by Spanish vessels and protect the integrity of British territorial waters.

Both Britain and Gibraltar say the incursions violate British sovereignty, but the Spanish position is that the waters around the Rock belong to Spain.