It is well recognised that the Irish border is "one of the trickiest issues in the Brexit process" and could potentially lead to a "no-deal" Brexit: the EU's Chief negotiator Michel Barnier has been frequently quoted as warning the UK that there is still a "risk of failure" if the parties do not agree on the post-Brexit future of the Irish border. However, this is not the only territorial bone of contention on which the UK and the EU have to chew in order to make the UK's withdrawal from the EU "orderly".

The draft Withdrawal Agreement's provision on territorial scope flashes green _ a sign that "the text is agreed at negotiators' level". Accordingly, the draft Withdrawal Agreement is intended to apply not only to (and in) the UK, but also to Gibraltar, the Channel Islands and the Isle of Man, the Sovereign Base Areas of Akrotiri and Dhekelia in Cyprus, and some other overseas countries and territories having special a relationship with the UK, including the British Antarctic Territory, the British Indian Ocean Territory, and the British Virgin Islands. However, the green colouring cannot hide the fact that the details are far from agreed.

Among these other territories mentioned one is particularly difficult in terms of the UK's Withdrawal Agreement with the EU: Gibraltar. The Channel Islands off the Normandy coast and the Isle of Man in the Irish Sea are significantly less affected by border issues raised by Brexit; this is equally true for British overseas territories and the Sovereign Base Areas.

The Gibraltar "issue"

The outcrop at the southern tip of the Iberian Peninsula has been a British overseas territory for more than 300 years. Gibraltar was ceded to Great Britain by Spain under the Treaty of Utrecht in 1713, marking the end of the War of the Spanish Succession. It now, again, stands in some tension between competing European interests: not only did Gibraltarians vote overwhelmingly (by some 97%) to remain in the EU but a "soft" Brexit will depend not only an agreement on the Irish border and/or Customs Union, but also on an agreement about the future of Gibraltar. The results of a (not representative) survey conducted earlier this year suggested that voters in England would rather lose Scotland during Brexit than Gibraltar, appearing to emphasise the symbolic importance of Gibraltar to many Britons.

At the moment, around 40% of the local workforce in Gibraltar is made up of commuters; half of whom are Spanish citizens. The "Rock of Gibraltar" and the border regions, in particular La LÌ_nea de la ConcepciÌ_n, in the Andalucia region of Spain, are deeply interdependent in terms of the labour force. This means that a "no-deal" Brexit could be felt very harshly by Gibraltarians and the people living and working on and around the peninsula. Another factor for Gibraltar's significance in the Brexit negotiations is its airport, which is of significant importance to Spain, especially for the tourism industry. The airport is built on an isthmus which connects Gibraltar and Spain and the main road to Gibraltar crosses the runway: every time a plane comes in the barriers need to be closed.

Because of this strong interdependence, the EU has given Spain a special position in Brexit negotiations. Article 24 of the European Council guidelines of 29 April 2017 states that: "After the United Kingdom leaves the Union, no agreement between the EU and the United Kingdom may apply to the territory of Gibraltar without the agreement between the Kingdom of Spain and the United Kingdom."

The EU reiterated its position this year in the European Council Guidelines of 23 March 2018, calling for "intensified efforts" on the remaining withdrawal issues, notably as regards Gibraltar. It is not quite right to describe Spain as enjoying a "veto" since it is questionable if Article 50 TFEU has the power to give a single EU member state a veto on the Withdrawal Agreement. However, the political force is clear. Jean-Claude Juncker, the President of the European Commission, has conceded that Spain's special power in the Brexit negotiations is a "solidarity lever" for Spain. If the UK and Spain are not able to arrive at a mutually satisfactory bilateral agreement regarding Gibraltar before the UK exits the EU next year, then it is possible that the EU will insist that the Withdrawal Agreement does not apply to Gibraltar (essentially a "hard" Brexit for Gibraltar in March 2019), a position that the UK would be under pressure to reject. In theory at least no agreement between the UK and Spain on Gibraltar might result in no Withdrawal Agreement at all.

UK/Spain negotiations

The positions taken up publicly by Gibraltar and Spain have been robust but not, so far, particularly antagonistic. Chief Minister of Gibraltar Fabian Picardo has said he will fight to defend British (exclusive) sovereignty, jurisdiction and control. Spain, meantime, has not renewed any explicit claims to Gibraltar but, equally, has not expressly relinquished its territorial ambitions. Alfonso Dastis, the Spanish Foreign minister said Spain would "continue to keep an eye" on the territory, but they will not use Brexit to achieve it: "We don't want to convert the conversation between the EU and Britain into a hostage-type situation." The question of (co-) sovereignty over Gibraltar appears to be off the table.

Instead negotiations revolve around taxation and environmental issues, as well as the operation of Gibraltar's airport. Another top priority is to secure the rights of the thousands of cross-border workers who will be affected by Brexit. They key for Gibraltarians will be that whatever agreement is reached is subject to the condition that they remain under exclusive British sovereignty. Beyond that there is room for compromise. Chief Minister of Gibraltar Fabian Picardo said: "Friction does not scare us. We are used to friction." Gibraltar is part of the single market, however not in the Customs Union and not in Schengen, which means daily border controls for commuters.

As things stand, the UK and Spain are displaying an optimistic attitude. At the latest Joint Ministerial Council (Gibraltar EU Negotiations) in London on the 5 June 2018, both the UK and Gibraltar confirmed their commitment to continue to work together to achieve a Brexit deal that fully recognises the priorities of the peninsula. Nobody really expects Spain to delay Brexit negotiations; however, a risk remains that Gibraltar could, in due course, be a sticking point. And so it cannot be repeated often enough: "Nothing is agreed until everything is agreed".

For more information from Brodies Brexit Advisory Group, please visit our Brexit Hub.