The Anomaly on the Med

Gibraltar

Unkind critics have sometimes said that Gibraltar is one big anomaly: a fragmentary possession of a colonial power that should have been let go of years ago. A scrap of Spanish rock controlled by a country several hundred miles away because of something that happened 300 years ago. A scrap, moreover, running its ?nancial industry in a way that sometimes annoys its near neighbour – not to mention the rest of Europe.

In fact, as the critics should realise if they were really going to go for the jugular, Gibraltar is not a single anomaly, it is several rolled into one.

There is the obvious political dimension, which is what most people think of when they’re not ?xated on clichés to do with monkeys (they’re not monkeys in fact, they’re apes – there is a difference). The UK’s main historico-legal claim to the rock is that a Tory government signed a treaty in 1713 at the end of the war of the Spanish Succession. That certainly doesn’t look like a forward-looking, communautaire way of dealing with things in today’s modern European Union.

Gibraltar’s connection to the rest of the EU is similarly anomalous. For EU purposes, the Rock is considered to be part of south-west England, several hundred miles away to the north. A little bit of Cornwall on the Med. Moreover, because of Gibraltar’s status as a UK dependency, it can to a certain extent choose how it implements EU directives, without being bound by them in quite the same way as any other member state – “they can be adopted to promote or enhance Gibraltar’s competitiveness,” says a satis?ed tourist authority. You can see why hackles rise north of the border – even as far as Brussels.

Then there is the ?nancial anomaly. On one side of Gibraltar’s border with Spain taxes, company formation rules, and fund regulations are roughly as they are throughout the rest of the onshore European world. Cross into Gibraltar and you can set up a discrete offshore company for a few hundred pounds and avoid much if not all tax.

Finally, there is even a cultural anomaly at work. Like many colonial remnants left up the beach as the tide of Empire ebbed, Gibraltar often looks to the visitor more like 1950s England than today’s mother country – let alone the rest of Europe. There is a noticeable desire to emphasise connections to Britain without quite getting it right – dressing for dinner, toasting the Queen, bits of fossilised idiomatic language of the ‘by Jove!’ variety.

An anomaly on the Med except for…

The truth is, Gibraltar is probably all these things, and the ill-intentioned onlooker could make a plausible-sounding case for sweeping away this cluster of anomalies, historical, political and ?nancial, overnight.

Except for one crucial point, backed up by a powerful expression of human desire. The point is this: if all nations and communities were required to be the product of clean, rational historical outcomes, which ones would survive? Britain itself? Spain?

The powerful expression is this: in the recent referendum taken among Gibraltar’s 30,000 inhabitants, 99 per cent said they wanted nothing to do with Spanish blandishments about sovereignty. Go onto Gib’s main street and ask a random resident what he would like Gibraltar’s future to look like and he will probably say that he prefers the independence option, while retaining the rock’s close ties to the UK. That would seem to be that.

But what about Gibraltar as an offshore centre? Gibraltar has certainly been pushing itself as a place to do international ?nancial business for some time now, ever since it passed its ?rst ‘come-and-domicile-here’ tax laws in 1967. And that gets up the Spanish nose quite a lot – not least because a lot of Spanish money seeps across the border out of the clutches of Madrid.

But most of the criticism of the place is generic and to do with a dislike of offshore centres per se. There is little, apart from a series of seminars on offshore ?nance perhaps, that can be done to convince people out of that attitude.

But a more pertinent question could be put to the critics: how is Gibraltar to earn a living without attracting tax-exempt companies to locate there? Fishing? Ship bunkering? Gibraltar certainly has a history of carrying out that function – indeed it is the biggest bunkering station in the Med - but it is hardly about to keep the whole community in ?sh and chip shops and British pubs. The British armed forces? Their presence on the rock has been reduced dramatically in recent years. They contribute, certainly, to the economic life of what is, in effect, a community clinging to a rock. But, again, not enough to keep the place going. Offshore ?nance is there to stay.

Stubborn and there

As far as the speci?cs go, Gibraltar is rightly condemned for some things, and wrongly for others. And the things it is rightly condemned for are hardly speci?c to Gib – and not even con?ned to offshore centres.

Does it attract crooked money? Probably, yes. There was a recent brouhaha over a Russian oligarch’s shares in one of those vast energy companies that arose after the fall of the Soviet Union. Former Yukos head, Mikhail Khodorkovsky, was accused by the Russian government of stealing large chunks of Russian infrastructure in the form of shares in Yukos, the oil company he controlled, and holding them via the Gibraltar branch of Russia’s Menatep Bank. That, though, is less to do with Gibraltar than it is to do with the present state of Russia’s oligarchs, banks and government apparatchiks.

And is there any territory containing more than its share of international banks that doesn’t also contain its share of crooked Russian money? One brings to mind a particular square mile-full of ?nancial institutions, for instance.

So what should Gibraltar be judged in terms of? Its survival in an unlikely situation? Its prospering, sometimes to a greater extent than its looming neighbour to the North? Its stubborn and resourceful people? Or as a bunch of anomalies ?ying in close formation? All of the above.