Treaty will offer new opportunities for Gib, but also a need to adapt

On Wednesday last week, as the Cabinet gathered in No.6 Convent Place for an early-morning meeting attended by UK Foreign Secretary David Lammy and Europe Minister Stephen Doughty, there was finally clear light at the end of the treaty negotiating tunnel.

The political agreement had yet to be sealed in Brussels later that day and the history of this tortuous process meant that, in public statements at least, all remained guarded, wary of prompting any last-minute slip-up.

But the omens were good.

“By Wednesday, we knew we could do it,” Chief Minister Fabian Picardo told the Chronicle.

“The Gibraltar equities had been resolved subject to formal sign-off and the Foreign Secretary gave the Cabinet clear assurances on sovereignty and we had a general discussion during which Sir Joe [Bossano] made clear his views on similar negotiations in the past and the historic relationship with the UK Government.”

“This set us up well for the lead-up to the final meeting.”

Mr Picardo said the whole Cabinet had been “involved in the process and is fully supportive” of the arrangements reached, “subject to us all agreeing the final treaty text”.

“That is what we have all repeatedly said,” he said.

“We have agreed every aspect of the negotiation with the successive Cabinets that I have led during the negotiating process.”

Unlike the Cordoba Agreement, this agreement was not a choice, Mr Picardo said, but came about because of Brexit.

“It is a necessity for our people and our economy because the alternative is a harder border which, if we can, we want to avoid for our people and our businesses,” he said.

“This agreement for a treaty doesn’t just avoid that, it creates a better future by creating easier flows for our people and our goods and creates opportunities we were denied even when we were in the EU.”

Mr Picardo stressed that the negotiating parties had “neutralised” the issue of sovereignty with “the fullest and most effective” sovereignty clause.

“It's not just without prejudice to the positions of the parties in respect of sovereignty,” he separately told GBC last week.

“It's also that nothing done under the treaty gives any of the parties the right to claim any advance in respect of sovereignty, nor does it represent any retrocession in respect of sovereignty in respect to the position of any of the parties.”

After the meeting, those present – including Robbie Bulloch, the FCDO chief negotiator on the Gibraltar team; Attorney General Michael Llamas; and Chief Secretary Glendon Martinez – signed the agenda as a historical record of the occasion which will be kept in the National Archive.

TREATY TEXT

Last week’s political agreement has yet to be finalised into a binding treaty text, which is expected to be ready by “early autumn” and the detail of which will be carefully scrutinised once it is available.

While the political agreement has been widely welcomed, the often-repeated caveat is that ‘the devil will be in the detail’.

Once the text is completed, the treaty text must be ratified by the UK Parliament and the European Parliament, the two signatories the UK and the EU. The UK will be signing “in respect of Gibraltar”, which has constitutional competencies in many key areas including immigration.

For the EU, ratification will be handled as a “non-mixed” agreement, which means the text will have to be approved by the College of Commissioners, the European Council and the European Parliament.

It will not need to be ratified by the individual parliaments of the EU’s 27 members, however.

In the UK, the treaty text will be laid in Parliament for 21 days under the terms of the UK’s Constitutional Reform and Governance Act 2010, after which it will be automatically ratified if there is no objection.

During that 21-day period, MPs can debate the text and reject it, although Mr Picardo does not envisage that opposition to the agreement.

Those two ratification processes are the key to the treaty taking effect, given the agreement is between the UK and the EU.

But the first step will be in the Gibraltar Parliament, which will debate and vote on a motion asking the UK to initiate the ratification process.

The treaty text is already well advanced.

“Most of the thorny text has been dealt with now,” Mr Picardo told the Chronicle.

“That is what has been hard about this negotiation too, in that we have wanted to negotiate the hardest of the words and phrases that we will see in the text and the expression of the hardest of the concepts.”

“The rest should be easier.”

“Once we have the final texts, the Cabinet will make an assessment of it and, if we accept it, then it will go to the Gibraltar Parliament to be approved in a motion that will resolve to ask the UK to start the UK side of the process of ratification.”

Mr Picardo remained firm that the treaty will not be put to a referendum in Gibraltar.

“This treaty is our trade and immigration deal with the EU and, in that way, it is like our Trade and Cooperation Agreement [TCA],” he said.

“[The UK/EU TCA] was not submitted to a referendum in the UK.”

“I was clear in the election on what our policy was on a referendum.”

And amid controversy in Spain surrounding the Socialist party and questions on whether it might trigger electoral change, Mr Picardo remained positive but would not be drawn on any detailed assessment.

“If there is a change of Government in Spain that could certainly have consequences on timing, but it should not have consequences on the agreement,” he said.

“I don’t want to be drawn further on that at this stage.”

FLUIDITY KEY

Mr Picardo is currently in New York where he is due today to address the United Nations’ Special Committee on Decolonization (C24) during its annual meeting.

He is accompanied by the Deputy Chief Minister, Dr Joseph Garcia, and their schedule includes other meetings and engagements around the C24.

This will be the first session at the UN since the announcement of a political agreement between the UK and the EU about Gibraltar, which will no doubt figure in his address.

As on past occasions, the Chief Minister is also expected to assert the right of the people of Gibraltar to self-determination and call for the decolonisation of Gibraltar through its removal from the UN list of non-self-governing territories.

Ahead of the meeting, and after several days of intense discussion and media coverage of last week’s announcement, Mr Picardo remained clear that he believed this was a good deal for Gibraltar.

“For us, the key here is guaranteeing fluidity for our people and our economy,” he said.

“The value is finally getting rid of Spain’s ability to strangle our economy by delaying people’s ability to enter or leave Gibraltar.”

“Today they have that control over tens of millions of crossings at the frontier between us. They will lose that as a result of this deal.”

“For our retail businesses, they will get access to 500 million customers and many more tourists in their shops.”

“For our services industry, they finally get the ability to recruit and retain people without the difficulties they have today.”

“For everyone, there is going to be certainty around a legal text. Rights and obligations will be clear.”

But there was a caveat to that bullish overall observation, and acknowledgment that the treaty, once it comes, will not mean good news for everyone.

“I want to be clear about one thing,” Mr Picardo said.

“Some things will change and some people will have to reinvent themselves.”

“We could not negotiate the status quo.”

“That was not possible and everyone should understand that.”

SCHENGEN CHECKS

To achieve border fluidity, the negotiating parties agreed to establish “dual Gibraltar and Schengen border checks” at Gibraltar’s port and airport, to be carried out in full cooperation between the EU and UK/Gibraltar authorities, removing all checks at the border between Gibraltar and La Linea for the many thousands of people who travel across daily in both directions.

“For the EU, full Schengen checks will be carried out by Spain,” a joint statement by the UK, the EU, Spain and Gibraltar said.

“For the UK, full Gibraltar checks will continue to be carried out as they are today.”

Gibraltar is not joining the Schengen area, but the agreement will create a common travel area between the two.

Central to facilitating that common travel area will be a shared immigration facility staffed by both Gibraltarian and Spanish officers.

Colloquially known as the “Schengen shack”, the facility next to the airport will straddle the border in equal distance into Spain and Gibraltar.

There will be no Schengen checks at the port, where most arrivals are cruise passengers and pre-cleared for immigration purposes. Any other maritime arrivals, for example on yachts, will be taken by Gibraltar authorities – potentially accompanied by Spanish counterparts out of uniform and unarmed - to the Schengen shack for clearance.

For air passengers, a Gibraltar resident arriving at the airport would first pass Gibraltar immigration staffed by officers from the Borders and Coast Guard Agency.

They would then pass a Schengen check, in the form of an e-gate and, once through both, would be cleared for entry not just to Gibraltar but to all the Schengen area.

If there is a problem at the e-gate, the traveller would go to “an individual, an officer, who will be able to check your passport and continue to allow you on your way,” Mr Picardo said during the Viewpoint programme.

“What will not be possible is for that Schengen official to stop you from returning to Gibraltar.”

“If you are a Gibraltar resident, you cannot be prevented by the Schengen authorities from returning to Gibraltar, so they will have to let you through.”

If a Gibraltar resident triggers a Schengen alert that has not been flagged by Interpol in the BCA check – a highly unlikely scenario, according to Mr Picardo - the Schengen authorities will not be able to arrest or detain that person.

“They will have to ask the Gibraltar authorities to arrest and detain you because you are a resident of Gibraltar and a Gibraltarian,” Mr Picardo said.

“So that is a huge demonstration of your right as a Gibraltarian to only be dealt with by the Gibraltar authorities.”

Negotiators had initially envisaged a role for Frontex for a period of four years, as a way enabling Schengen checks while “staving off” Spanish presence in Gibraltar.

But that would have created a four-year horizon that has been avoided by addressing Gibraltar’s concerns from the outset, Mr Picardo said during the GBC Viewpoint last week.

The Gibraltar residency card will, in effect, become a critical travel document that will allow access to the Schengen area – meaning Spain and beyond – without having to undergo further checks at the border, and without a countdown on the holder’s period of stay.

“All Gibraltar residents will be able to access the Schengen area without checks,” Mr Picardo later told the Chronicle.

“The Gibraltar residence documentation will, in effect, exempt you from the formalities of the 90 in 180-day rules.”

“Registered Gibraltarians who are not currently resident in Gibraltar will be able to apply for residence documentation as they have the right to become resident.”

“That residence documentation will also exempt them from the rules on how long they can remain in the Schengen area.”

The decision on who can be issued a residency card will remain Gibraltar’s, although now with the added factor of being able to check against Schengen data.

“Only Gibraltar can determine who is going to reside in Gibraltar,” Mr Picardo said.

“In making the determination, we will carry out our usual checks in all our databases and UK data bases. That will include Interpol police checks.”

“Additionally, we will check with the Schengen authorities for anything on the Schengen Information System which may have been missed in our checks and we will not issue a residence permit if there is an alert against the individual or anything known against the individual on grounds on public security, public health or public policy insofar as that threatens the fundamental tenets of society.”

“We would, of course, not want such a person here in any circumstances.”

For travel purposes, nationals from non-EU countries who require a visa to enter the Schengen area will continue needing that to enter Schengen through Gibraltar.

The rules on which Schengen country travellers need to apply to for a visa will remain the same as they are now and will depend on what country they will spend most time in or where they will enter Schengen.

On asylum applications, Gibraltar “will continue to have the final say” but will consult both Interpol and SIS data bases in reaching a determination.

CUSTOMS

The political agreement also envisages a bespoke customs union between Gibraltar and the EU.

Spain has made much of the need for a level playing field, but some Gibraltar businesses also fear that, faced with higher operating costs and smaller economies of scale on the Rock, the treaty could prove damaging to their business models, particularly in the retail sector.

To achieve this level playing field, Gibraltar will apply a new transaction tax “in the nature of an import duty” that will "never be lower" than the lowest VAT rate in the EU, which is currently 17% in Luxembourg.

Mr Picardo acknowledged the legitimate concerns voiced by businesses but said a key factor in the equation is that Gibraltar residents who shop in Spain will no longer be able to reclaim the 21% VAT once the treaty comes into effect.

That, he said, will bring prices in Spain much closer to those in Gibraltar.

The treaty envisages a “safeguard clause” allowing further reductions to the transaction tax in line with the lowest level that EU VAT rates provide for.

For Gibraltar businesses, he added, the treaty will mean a larger potential market and the ability to sell into the EU.

The treaty does not cover the freedom of movement of services. That means that any Spanish business that wants to deliver into Gibraltar from Spain will have to be fully registered and licensed in Gibraltar for everything from tax and social insurance to vehicles.

Mr Picardo said successive governments in Gibraltar had since the early 2000s implemented reductions in import duties on most products, which broadly used to stand at 12%.

He said the agreement “isn’t perfect” but that this was the nature of a negotiation, adding that in exchange, Gibraltar’s market would expand and businesses would be able to access the wider EU market with an import duty that was “just a little more” than in the past.

The Chief Minister said “I don’t think there will be many who will be worse off” as a result, though he urged any businesses with concerns to contact the Gibraltar Government to explain their situation and explore potential assistance though the implementation period.

“We don't think that anything that we are going to propose is going to be existential for any Gibraltar businesses,” he said.

“And we think this is actually going to produce a boon to most, if not all businesses in Gibraltar.”

The Chief Minister said only Gibraltar’s HM Customs would have powers in respect of goods in Gibraltar.

“Only Gibraltar Customs will be able to act in Gibraltar,” he said.

“Spanish Customs can accompany Gibraltar Customs and receive information, just as can happen now, but that will be provided for in the treaty in a more formal way so that the integrity of the Single Market can be assured.”

And he stressed: “The transaction tax is instead of VAT, not in addition to it, so a business that is importing goods only pays the transaction tax.”

“Because the transaction tax is like an import duty, Customs clearance agents will likely find their business is unaffected.”