Gibraltar on Tuesday. A.Carrasco Ragel / EFE

Spain and the UK have reached a bilateral preliminary agreement on Gibraltar. Both governments have closed the deal that will guide relations between Spain and The Rock once the UK withdraws from the European Union in the process commonly known as “Brexit.”

The preliminary agreement, which is part of the Gibraltar Protocol in the draft Brexit deal, comprises four memorandums of understanding (MoUs) and one tax treaty, according to Gibraltar Chief Minister Fabian Picardo. Government sources have confirmed this information to EL PAÍS.

The memorandums of understanding address the four most sensitive areas for relations between Spain and Gibraltar

This negotiation has been conducted on the sidelines of the general Brexit agreement, to which Spain is still voicing strong objections. Despite the uncertainty currently surrounding the general withdrawal agreement, the Spanish and British governments have chosen to press ahead with these bilateral talks while they await further developments.

Veto threat

Spanish Prime Minister Pedro Sánchez on Wednesday night admitted to this preliminary deal, but said that he would still veto the general Brexit agreement if Spain’s conditions regarding future relations with Gibraltar are not met.

Sánchez spoke on the telephone with British PM Theresa May to tell her that Spain will vote no to the draft Withdrawal Agreement on Sunday unless the document makes it clear that the way in which the future relationship between the UK and EU applies to Gibraltar must be negotiated solely between Madrid and London, said sources in the Spanish government.

Spain says the bilateral relationship with be more balanced as a result

“If the problem is not resolved, Spain will have to vote no to the Brexit agreement because if affects the essence of our country, of our nation,” said Sánchez in Valladolid, where he was attending a Spain-Portugal summit.

“And you are hearing this from a government that has managed to negotiate a protocol and four memorandums on the relationship with Gibraltar. Ours is a constructive attitude,” he added, alluding to the breakdown in relations under the previous Popular Party (PP) administration.

A spokesperson from the British government said that May used the call with Sánchez to reiterate “her commitment to agreeing a deal that works for the whole UK family including Gibraltar, the other UK Overseas Territories and the Crown Dependencies.”

The May administration has said that it is negotiating a global agreement and that Gibraltar will not be excluded from these talks about post-Brexit arrangements.

“We will not exclude Gibraltar from our negotiations on the future relationship. We want a deal that works for the whole UK family and that includes Gibraltar,” said May in the House of Commons.

MoUs

The MoUs address the four most sensitive areas for relations between Spain and Gibraltar, including tobacco products. The agreement stipulates that Gibraltar authorities pledge to raise the price of these products to make them less attractive to smugglers.

Ours is a constructive attitude

Spanish PM Pedro Sánchez

Another crucial item is the fate of cross-border workers, an important matter for Spain as there are around 10,000 Spaniards who cross for work into Gibraltar every day.

The third MoU involves environmental concerns, and the fourth addresses cooperation on police and border control issues.

The tax agreement, perhaps the most important one of all, seeks to reduce what Spain views as unfair competition from Gibraltar, where many businesses choose to register because of the lower taxes even through their activities take place in Spain.

Picardo, who returned from Madrid on Wednesday morning, said that work has concluded and is now “subject only to text stabilization, legal checks and minor clarifications,” according to a Gibraltar government release.

The chief minister will provide further information to Gibraltar institutions on Thursday. Meanwhile, Spanish authorities are suggesting that the five texts meet most of Spain’s demands, and that the bilateral relationship will be more balanced as a result.