Select Committee on Foreign Affairs Appendices to the Minutes of Evidence


Memorandum from the Chief Minister, Government of Gibraltar

  1.  By this Memorandum, the Chief Minister of Gibraltar the Hon Peter Caruana QC, on behalf of the Government of Gibraltar wishes to place before the Committee, by way of evidence, the information contained herein, and the documents attached (as Annexes) hereto.


  2.  At paragraph 22 of the transcript[11] and in answer to Mr Illsley, the Foreign Secretary gave evidence to the effect that the Gibraltar Government's initial condition for participation in dialogue was "two flags, three voices" and that after this had been made available, it was rejected, and further, last minute conditions were added. This is simply not correct.

  3.  The Foreign Secretary stated as follows:

    "My very great regret is that the Government of Gibraltar have not been present at these negotiations notwithstanding the fact, LET ME MAKE THIS ABSOLUTELY CLEAR, that the initial demand of the Government of Gibraltar was for what has been described as two flags three voices, which was originally resisted by Spain. I negotiated with Spain, they agreed two flags, three voices in every particular and that was then turned down again by the Government of Gibraltar when they imposed further conditions on their participation which had not been there in the first place. One of the conditions was that there should be some kind of complete veto over the final outcome of any negotiations between three parties. Well you can't have negotiations on that basis. . . "

  4.  These statements are wholly incorrect and irreconcilable with the true facts as they have happened, for two reasons:

    (1)  Firstly, it is not true that the Gibraltar Government turned down "two flags, three voices". The Gibraltar Government itself first proposed the practical detail of a "two flags, three voices" proposal in 1996. At no stage until 25 January 2002 did HMG accept this proposal. Attempts had been made to negotiate these details in 1996 and 1997, but these had failed. Finally, at meetings with the Foreign Secretary and the Director Wider Europe, James Bevan on 25 January 2002 detailed two flags, three voices proposals were orally offered by HMG and accepted by GOG. This acceptance has been acknowledged in public several times by GOG (despite the fact that the arrangement has not yet been concluded in writing). I cannot therefore comprehend the statement that GOG "turned down" the "two flags, three voices" offer.

  (2)  Secondly (and far from being "absolutely clear") it is not true that the Gibraltar Government subsequently to the above (or ever) imposed "further conditions on their participation in dialogue which had not been there in the first place". The so-called "veto" condition, namely that no agreement should be entered into unless all three participants (HMG, the Government of Spain and GOG) were agreed, in manner that no agreement should be struck over the head of the Gibraltar Government has been a GOG requirement from the outset. I would refer the Committee, for example, to Gibraltar Government press release No 143/96 dated 26 November 1996 (Copy attached as Annex 1(a)[12]. That press release contained the following statement:

    "The fact that Gibraltar is a separate side within the British delegation must be reflected by Gibraltar's agreement being required for ALL decisions and agreements affecting us and not just about sovereignty. In other words, nothing could be agreed without the specific agreement of three sides, ie UK, Gibraltar and Spain".

  This fact has been the subject of innumerable public statements over the years in media in Gibraltar, the UK and Spain and in many public speeches witnessed by Foreign Office Officials. In addition, it has been the subject of much correspondence between GOG and the FCO, and has also been discussed extensively and at length in meetings between the Chief Minister and every Foreign Secretary and Minister of State for Europe at the Foreign Office (includig the present incumbents) sine May 1996, and at numerous meetings with FCO officials.

  It is simply not possible to assert that it is not intimately well known to the Foreign Office, both from public and private statements, that this has been the unchanged position of GOG since 1996.

  5.  By way of sample (only) of the above, there is attached to this memorandum copies of the following documents:

    (1)  As Annex 1(a)[13], Press Release No 143/96 dated 26 November 1996 issued by the Government of Gibraltar. (Paragraph (3) on page 2—quoted above—refers).

    (2)  As Annex 1(b), Press Release No 266/97 dated 27 November 1997 issued by the Government of Gibraltar. This press release contains the following statement:

    "Those conditions are that Gibraltar must have an effective separate voice, that Gibraltar must be present throughout all parts of the talks and that nothing can be agreed at talks on any issue affecting Gibraltar without the explicitly expressed agreement of the Gibraltar Government".

    (3)  As Annex 1(c), Press Release No 277/97 dated 8 December 1997 issued by the Government of Gibraltar.

    (4)  As Annex 1(d)[14], Letter dated 9 December 1998 addressed by the Chief Minister, Peter Caruana, to the then Minister of State at the FCO, Joyce Quinn. (paragraph (3) on page 2 refers)

    (5)  As Annex 1(e)[15], Letter (without enclosures) dated 29 October 1997 addressed by the Chief Minister, Peter Caruana to Mr David Redaway (Head SED/FCO).

    (6)  Annex 1(f)[16], Letter dated 8 December 1997 addressed by the Chief Minister, Peter Caruana to Robin Cook.

    (7)  As Annex 1(g)[17], Page 31 of the Election Manifesto of 2000 of the Governing party (the Gibraltar Social Democrats), which says:

    "We will remain willing to engage Spain in a process of dialogue provided that the process is both dignified and safe. Dignified in that we are represented in our own right with our own voice, and safe in that nothing can be agreed on any issue without our consent or imposed on us against our wishes".

  6.  On 16 July 2001 I was telephoned by the Director Wider Europe at the FCO, then Mr John MacGregor, who informed me that Messrs Straw and Pique had, that afternoon at the margins of a European Council meeting, agreed to re-launch the Brussels process and would publicly invite me to attend. I replied that GOG's terms for participation were very well known, that these had not been addressed and that there was no point in trying to "bounce" us into participation without addressing our terms. On 18 July 2001, I wrote to Mr MacGregor confirming these points in detail. A copy of that letter was sent to Mr Hain on the same day.

  7.  On 20 September 2001, I made a public statement at a press conference which was broadcast live on GBC and fully reported in the Gibraltar written press. In that broadcast I repeated the longstanding position. I said:

    "For many years now the Government's policy has been that it wishes to engage Spain in a process of dialogue provided that it is both safe and properly structured. Safe for Gibraltar means that nothing can be agreed at, or result from, such dialogue on any issue (not just sovereignty) affecting Gibraltar without the specific agreement of the Gibraltar Government".

  8.  This position was restated to the Foreign Secretary at a meeting between us in London on 9 October 2001.

  9.  The same position was restated in a formal and detailed position paper submitted by GOG to FCO on 16 October 2001.

  10.  The same position was restated by me to the Minister of State for Europe, the Rt Hon Peter Hain, at a meeting in London on 23 October 2001.

  11.  On 23 October 2001 the Foreign Secretary wrote to me offering terms for participation in the talks that failed to take account of GOG's longstanding and well known position, as it had been repeatedly stated since 1996. A copy of my reply, dated 26 October 2001, is attached as Annex 1(h)[18].

  12.  The Government of Gibraltar's longstanding terms for participation in dialogue were again publicly repeated in press releases 175/2001 dated 30 October 2001, 178/2001 dated 2 November 2001 and 190/2001 dated 20 November 2001. Copies of these are attached as Annexes 1(i)[19], 1(j)[20] and 1(k)19.

  13.  The Gibraltar Government's terms for participation in dialogue were explained in a letter that I addressed to the Prime Minister dated 8 November 2001. In that letter I said:

    "The other term is that the UK should assure me that nothing will emerge from or be agreed at talks unless all of HMG, the Spanish Government and the Gibraltar Government agree".

  A copy of this letter is attached to this memorandum as Annex 1(l)[21].

  14.  In a ministerial broadcast on GBC radio and television on 12 November 2001, which was fully reported in the Gibraltar Chronicle, I repeated the line maintained since 1996 by saying:

    "I advocate, indeed I positively seek, Gibraltar's participation in safe dialogue. Safe dialogue is dialogue in which we take part with the comfort and security that nothing is agreed unless we agree to it as well. The alternative, which is neither safe nor reasonable (but which Mr Hain expects of us) is to participate in, and therefore legitimise, a process of dialogue in which I will be consulted, but in which the UK and Spain can conclude Agreements above our heads. I have told the British Government that I will not take part in any process of dialogue on these politically unreasonable and unsafe terms."

  15.  The same terms for participation were articulated in my written statement dated 28 November 2001 to this Committee. (Pages, 7, 8 and 9 thereof refer). A further copy is attached as Annex 1(m)[22].

  16.  I repeated this position to the Committee in oral evidence on 28 November 2001 (paragraph 9 of the record of my evidence refers.)

  17.  The same position was restated by me at a meeting on 7 December 2001 with Mr Ed Owen, the Foreign Secretary's Special Adviser.

  18.  The position was again restated in press releases No 8/2002 dated 11 January 2002 and dated 14 January 2002 (no number). Copies are attached hereto as Annexes 1(n)[23] and 1(o)22

  19.  The Gibraltar Government's longstanding position was again restated and discussed at a meeting between the Foreign Secretary and me in London on 25 January 2002; and in a meeting, on the same day with Mr James Bevan, Director of Wider Europe, FCO. It was at these meetings that the "separate voice" condition was offered by HMG (via a two flags, three voices formula) in the terms that had been sought by us. It was accepted by me. But the second longstanding condition (namely, that there should be no agreements above GOG's head) was refused.

  20.  At paragraph 22 of the Transcript[24] (still in answer to Mr Illsey) the Foreign Secretary also said:

    "And one of the conditions was that there should be some kind of complete veto over the final outcome of any negotiation between three parties. Well you can't have negotiations on that basis . . . ".

  It is not clear why the Foreign Secretary should say this. Negotiations between three parties are always and necessarily on the basis that nothing is agreed unless it is agreed by all three parties, otherwise the negotiations are only between the two parties who can agree or withhold their agreement.

  21.  In any case, the view expressed by Mr Straw was not apparently shared by either of Mr Straw's two predecessors in office:

    (1)  In a letter to me dated 24 October 1996, Mr Malcolm Rifkind, then Foreign Secretary said:

        "I also give you my assurance that I will not agree to any new arrangements involving Gibraltar which may be discussed at such meetings without your specific endorsement".

    (2)  In a letter to me dated 25 November 1996, Mr Rifkind said:

        "I will not agree, without your specific endorsement, to any new arrangements on any matter involving Gibraltar which may be discussed at such meetings".

    (3)  In a letter to me dated 3 December 1997, Mr Robin Cook, then Foreign Secretary said:

        "I can assure you that I will not agree to any new arrangements on any matter involving Gibraltar at the talks without your specific endorsement".

  22.  Contrary to Mr Straw's quoted statement, the fact is that, ironically, in 1996 and 1997 we had the "veto" but not the separate voice under two flags, three voices, whereas in 2002 we were eventually granted two flags, three voices, but refused the veto. Accordingly, it only became "impossible to have negotiations on that basis" (ie with nothing being agreed without GOG's agreement) in 2001-02. It had apparently been perfectly possible in 1996 and 1997.

  23.  During the visit to Gibraltar on 7 January 2002 of Sir Emyr Jones Parry (HM's Ambassador to NATO, but conducting this issue on the FCOs behalf) the Gibraltar Government proposed a formula to overcome the apparent unwillingness of the UK (and presumably also Spain), to accede to the Gibraltar Government's longstanding condition that no agreement be concluded "over its head" ie without its agreement. The proposal was that the issue should be finessed by structuring the talks so that there would be no agreements before a referendum. If there were to be no agreements, the Gibraltar Government's condition that there should be no agreements above its head was in effect satisfied, since the need for it was redundant. It was also suggested by us that any proposals that emerged and which UK/Spain wanted to put to referendum should be described as "proposals agreed to be put" rather than as "agreed proposals". In other words, the agreement was to put the proposals, but the proposals themselves would not be converted into an agreement unless and until approved in referendum. Thus, if rejected, they would never have constituted an agreement between the UK and Spain. These suggestions were rejected by HMG.

  24.  At paragraph 19 and 20 of the Transcript[25] Sir John Stanley put to the Foreign Secretary the following question which had been previously put to the Foreign Secretary on the BBC Radio 4 "Today" programme on 20 May 2002, and his reply:

    "Question: If you got what you wanted, a deal on sovereignty with Spain in the negotiations, and you put it to the people of Gibraltar and the people of Gibraltar said No would the deal that we are talking about now then be off the table?

    Answer: Yes, of course it would and that would be the end of it."

  25.  Sir John Stanley then asked the Foreign Secretary to confirm that that statement represents the British Government's position. Mr Straw replied, "Yes and I am surprised that anybody would think otherwise."

  Later on in that same answer Mr Straw explains that there would be a joint declaration followed by further negotiations leading to some form of new treaty, which new treaty would be submitted to referendum by the people of Gibraltar. If they rejected it "That's the end of the matter."

  26.  The question is whether the reference to "it" in the answer ("that would be the end of it") is intended as a reference to the final deal (which is what will be put in referendum) or whether it also includes the initial Anglo/Spanish declaration of principles (which it is not intended to put to referendum).

  27.  It has always been well understood and accepted by the people and Government of Gibraltar that no deal would be implemented in practice if rejected in referendum. The question has always been what will survive any such referendum rejection and what will be its political status thereafter?

  28.  The concern of the Government and people of Gibraltar is that although the detailed proposals/agreement negotiated after the initial joint declaration will be "off the table", "at an end" etc etc, the initial "joint declaration" of principles itself between the UK and Spain will nevertheless retain its status as an extant Anglo Spanish agreement on the political principles affecting Gibraltar.

  29.  Of course, we understand the fact that if the UK enters into any such agreements, the fact that it was done cannot be "airbrushed away", not can we ask Harry Potter to make all copies of it disappear. This is precisely why Gibraltar is opposed to the UK unnecessarily entering into such a Declaration of Principles. But the question is: if, despite our opposition HMG enters into a joint declaration of principles, will that initial joint declaration retain the status of an agreed Anglo Spanish declaration of the political principles applicable to the solution of the Gibraltar problem? Or will there have been an "end of the matter" to the initial joint declaration as well?

  30.  Despite Mr Straw's reply on the "To-day" programme, and indeed his answer to Sir John Stanley's questions, and despite also a similar answer given by Gisela Stewart MP on the BBC TV "Newsnight" programme on 2 April 2002. The answer to the question is not clear. The Gibraltar Government has been unable to obtain from HMG a clear statement to the unambiguous effect that the joint declaration would cease to have continuing political validity and effect as a common political position between the UK and Spain. Indeed, the opposite has always been intimated to us. In addition to numerous discussions at meetings, I attach as Annex 2 copy of my letters dated 30 January 2002 and 20 February 2002.[26] The latter is in response to Mr Straw's reply dated 14 February to the Governor.

  31.  I attach, as Annex 3 the transcript of Gisela Stewart's interview with Jeremy Paxman on the Newsnight programme on 2 April 2002[27].

  32.  The question therefore is whether what will be "at an end" "off the table" is only that which is put to the people of Gibraltar in referendum. Of course, as Mr Straw told the Committee at paragraph 63 of the Transcript[28] the Joint Declaration will not be put to the people of Gibraltar in referendum.

  33.  Neither the debate around this nuance or appreciation of its political importance is limited to Gibraltar. The Spanish press reacted in a chorus of recrimination to Mr Straw's above quoted statement (on the "To-day" programme) that if rejected in a referendum the deal would be off the table and that would be an end of it.

  34.  There were numerous Spanish press reports to the effect that this was a new position, incompatible with previous UK Ministerial Statements and incompatible with what had been under negotiations between the UK and Spain up to that point in time.

    By way of sample I would quote the following press reports (in loose English translation), the Spanish texts of which are attached to this Memorandum as Annex 4[29].

    (1)  "El Pais (21 May 2002):

  After reciting Mr Straw's statement on the "To-day" programme reported as follows:

    "The statement by the Minister caused surprise, because it is incoherent with previous statements by Straw himself, even in Parliament, and contrary to what Spaniards and Britons have been negotiating. For Spain, given that it does not recognise the Gibraltarian's right to self determination, it is fundamental that the agreement retains its validity, even if it cannot be implemented."

    (2)  "El Mundo" (21 May 2002):

  After reciting Mr Straw's statement on the "To-day" programme said:

  "We are, without doubt facing a very important change in the policy of the United Kingdom, which had until to-day maintained the position that even if the Gibraltarians rejected in a referendum the agreement reached by the two countries, the agreement would remain as a declaration of intentions by London and Madrid in that respect."

  (3)  Diario Sur (Sun Digital) (21 May 2002):

  Again after reciting Mr Straw's "off the table" statement on the "To-day" programme, said:

  "Mr Straw's statement, which coincided with the meeting between Jose Maria Aznar and Tony Blair, is a radical change in Mr Straw's position as stated a few weeks ago, and has alarmed Spanish diplomacy, which fears a British withdrawal from the agreement".

  "Jack Straw maintained precisely the opposite position in February in the House of Commons when . . . he said that the agreement would remain as a "common position" of both governments."

  (4)  "El Pais" (26 June 2002):

    "The panorama now painted by the British is not a hopeful one. Straw said two weeks ago that the agreement would "fall off the table" in the event that it were rejected by the Gibraltarians, a statement that goes directly against one of the positions that is irrenounceable for Spain: Madrid considers it essential that the agreement should preserve its validity after it has been rejected, even if it cannot be implemented. The contrary would be to grant the Gibraltarians something as close to the right to self determination as the right to veto an agreement between two Sovereign States.

    The great novelty of this relaunched negotiation, agreed in September when the two Ministers announced in Barcelona their intention to reach a definitive agreement before the end of this summer, is precisely Britain's willingness to reach an agreement even if the Gibraltarians oppose it, a fact that had been taken for granted would happen. In exchange, Spain, for the first time admitted the possibility of joint sovereignty of the Rock with the UK for an undetermined period".

Delay in submitting to referendum

  35.  Another matter of concern is whether, even if it is now HMG's position that all elements of the agreement (including the initial bilateral joint declaration of principles) are "at an end" or "off the table" in the event of a referendum rejection, will that referendum be expeditiously conducted or will the joint declaration subsist as a political agreement between UK and Spain for several years without referendum? The latter is unacceptable to Gibraltar and the Gibraltar Government has already said that, in those circumstances, it will itself conduct an expeditious referendum, under external supervision. HMG has made it clear that it would not recognise such a referendum as binding.

  36.  It therefore needs to be clarified whether (as the Spanish press accuse Mr Straw) he has changed his position so that the Joint Declaration would now not survive a referendum rejection of detailed proposals based on it. If that is a change of position, it is welcomed by the Gibraltar Government.

  37.  However, as from 20 May (when the Foreign Secretary first said what he said on the To-day programme) he has also started to say that it may be "many years" before anything is put to the people of Gibraltar in referendum.

  38.  It may therefore be possible that, as an alternative approach, the plan is now to avoid the issue of whether the joint declaration survives the referendum, simply by entering into the joint declaration and not staging a referendum for many years.

  39.  In this respect the Committee may be interested in the following transcript of an interview by the Foreign Secretary with GBC Television on 21 May 2002:

    Question: Re: Yesterday's "off the table" assertion—do you stand by it?

    Answer: Yes and it's exactly what I've been saying all the way along. I mean, by definition, if you say that the deal will not become operative unless and until the people of Gibraltar have endorsed it in a referendum, and if they reject it in a referendum organised by the UK Government, not by anybody else, then it is imperative, by definition it's not on the table.

    Question: But you have said before nothing can be airbrushed away, so either it can be airbrushed away or it's off the table?

    Answer: In the real world, if there's a joint declaration, preliminary agreement, made between the UK and Spain at a particular date—say we make that agreement, sometime this year, in the year 2001, in due course, and under the terms of the agreement, there are further negotiations which would, under the agreement, involve Spain in tripartite negotiations, and then you get to a point where it would take some years—it's put to a referendum organised by the UK Government in Gibraltar, if at the end of that long detailed process the people of Gibraltar reject it, the conclusions of the negotiations, the final negotiations, the draft treaty, then we accept the verdict and the matter is off the table. What can't happen of course is we can't suddenly re-write history.

    Question: Timescale for a referendum?

    Answer: Can't say exactly what the timescale would be, but it'll take some time and years in my judgement.

Gibraltar's Pension Arrangements

  40.  At paragraph 29 of the Transcript[30], Mr Straw confirms the view that the pensions situation in Gibraltar "is a scam".

  On 16 April 2002, the Minister of State for Europe, Mr Peter Hain, had seen fit to describe Gibraltar's pension arrangements as a "pensions scam" in the House of Commons. His remarks then, as the Foreign Secretary's now, completely omit to place the issue in its (or any) historical, factual context, now even to recognise that the issue has a long history, which, regardless of where the technical merits lie, render the use of such words as "scam" wholly unjustified, indefensible and improper.

  These words have caused universal anger and revulsion in Gibraltar, Spanish pensioners have, understandably received these remarks as an admission of their legal claim. The completely unnecessary use of such language has in effect, converted a potential liability into a certain one. The Spanish media has run headlines such as "UK Minister accuses the Gibraltar Government of defrauding Spanish pensioners."

  41.  According to the Oxford Dictionary "scam" means "a dishonest scheme". It does not mean something which is "opaque, not transparent and also potentially unlawful". A mere potential to be eventually adjudged by a civil court of law as being incompatible with EU Social Security Regulations prohibiting certain types of discrimination does not render the scheme "dishonest" and therefore the word scam is as inappropriate as it is offensive. Particularly when Mr Straw claims that (due to GOG's lack of transparency) he does not even know how the scheme works.

  42.  The alleged "scam" and "confection" is the mere existence of a privately owned, operated and controlled charitable trust called Community Care Trust which was established in 1989. Mr Straw said (para 29):

    "Then subsequently, the rules were changed by the creation of a little confection".

  There has been NO confection and there has been NO change in Gibraltar pension rules (except uncontroversial new legislation to restore the pension scheme in 1997, which HMG specifically approved). There have been no changes in the Community Care Trust arrangements since they started in 1990. Using mainly capital provided by way of grant from public funds, the Community Care Trust pays out, to residents of Gibraltar (of all nationalities, and regardless of the existence or extent of their entitlement to a state old aged pension), amongst other payments, grants called "household cost allowance" to assist with defraying the cost of housing, electricity, water and other household costs (which are high in Gibraltar).

  43.  At paragraph 29 of the Transcript the Foreign Secretary says:

    "we are not sure you are on good grounds but what is more we want to find out whether you are on good grounds, could we see the accounts. Could we see the basis on which this arrangement is made. My officials have been backwards and forwards to the Government of Gibraltar trying to get them to be transparent with us and so far the Government of Gibraltar have failed to be so."[31].

  Later (at paragraph 32) he added:

    "The difficulty is getting to the bottom of this arrangement and I am afraid to say that the Government of Gibraltar have not been forthcoming."[32]

  44.  (1)  It is not true that the British Government has not seen accounts of Community Care or that they have been denied access to such accounts or indeed that they have requested such accounts and been refused them.

  (2)  It is not true that HMG is unaware "of the basis on which this arrangement is made".

  (3)  It is not true that UK officials "have been backwards and forwards to the Gibraltar Government trying to get them to be transparent with us".

  (4)  It is not true that "so far the Government of Gibraltar have failed to be so" or that the Gibraltar Government have not been forthcoming.

  45.  These statements are not reconcilable with the facts as they have occurred over the years. The suggestion that the Gibraltar Government has withheld information from HMG or that HMG is not aware, (and has been for several years), of what the arrangements are, or how they work, is simply incorrect.

  46.  I attach as Annex 5[33] a comprehensive memorandum, drawn up by Mr Ernest Montado, the Chief Secretary of the Government of Gibraltar, dealing with three issues: (1) the pensions issue; (2) the Community Care Trust; and (3) the extent of consultation and exchange of information with HMG over the years. Mr Montado has been heavily involved in dealing with HMG on these issues since 1983 and has led contacts and discussions with HMG on them.

The alleged existence of opaque Government Companies

  47.  At paragraph 29 Mr Straw says:

    "One of the things they (the Gibraltar Government) have done, I understand—there is a whole series of companies run by the Government of Gibraltar . . . but these companies are still a very opaque set of front organisations by which it appears to us, because we cannot get at the full circumstances, some of these arrangements are made opaque."[34]

  48.  This is not true. The Gibraltar Government does not own or run a single opaque company nor are any of GOG's companies "front organisations".

  49.  The Gibraltar Government owns 12 companies. Their names, activities and ownership structure are published by the Gibraltar Government as part of a booklet that is inserted, every year, in local newspapers at Budget time to explain the Government's Estimates of Revenue and Expenditure to the general public in layman's terms.

  50.  The booklet for 2002 is attached to this Memorandum as Annex 6[35]. I would refer the Committee to page 10 of the Booklet which sets out the companies.

  51.  Of the 12 companies, one is the holding company for the others; six simply hold real estate; one carries out refuse collection; one is a construction company engaged in executing some publicly funded projects; one provides semi-sheltered employment (doing "community projects") mainly to persons who would otherwise have difficulty in finding and holding down employment; and one owns (but does not operate) the refuse incinerator.

  52.  None of these companies are in the least opaque:

    (1)  Their finances and transactions (except the construction company) are controlled by the Treasury under the auspices of the Accountant General and civil servants;

    (2)  Their audited accounts (including the construction company) are laid in the House of Assembly and are therefore in the public domain;

    (3)  Ministers make themselves fully accountable for the affairs of all the companies in the House of Assembly.


  53.  Having painted an entirely false picture of lack of transparency in pensions arrangements and in Government companies, the Foreign Secretary then moves seamlessly into the alleged issue of Statistics. At paragraph 29 he says "It is a similar position, I may say, in respect of official statistics."

  54.  There does not exist in Gibraltar even the smallest degree of lack of transparency in the conduct of public finances, nor in the conduct of government affairs, nor in the statistics related thereto. There has not been a failure to publish even a single statistic appertaining to transparency in the conduct of public finances and the affairs of Government. I attach, as Annex 7[36], a copy of a personal statement dated 26 June 2002 issued to the press by the Accountant General, Mr Dillip Dayaram.

  55.  The Foreign Secretary wrote to me by letter dated 19 April 2002 making certain allegations about statistics and alluding to transparency and probity of government. That letter was delivered to my office by fax on 24 April. He also raised this issue, briefly and at the end of our meeting during his visit to Gibraltar. I told him that he had evidently been misinformed as to the position in Gibraltar and that the Chief Secretary would write to the Deputy Governor setting out the correct position.

  56.  An article appeared in the Guardian newspaper on 3 June 2002 (less than six weeks after Mr Straw's letter was delivered to me and four weeks after our meeting) and subsequently in other newspapers, making all manner of allegations ranging from lack of transparency, failure to publish income and expenditure accounts, lack of probity etc. All referred to Mr Straw's letter to me. I attach as Annex 8[37] a sample of these articles. Indeed, before the first of these articles appeared (in the Guardian), we had been alerted by members of the UK press that these issues were being briefed out to them by "Foreign Office sources".

  57.  The Foreign Secretary's letter referred to the unavailability of a recent figure for the Gibraltar Economy's Gross Domestic Product, and to the non-publication of the "Abstract of Statistics".

Straw questions Gibraltar over finances, The Guardian, 3 June 2002

Fresh tension with Gibraltar over accounts, The Scotsman, 4 June 2002

Straw asks rock to explain missing data, Financial Times, 4 June 2002

Shady business in gibraltar, The Guardian Editor supplement, 5 June 2002

Straw fuels row over Gibraltar government's financial dealings, The Scotsman, 20 June.

  58.  Neither of these is related or relevant to transparency in public finances or the affairs of government, still less to probity of government, as was directly impugned in "The Scotsman" and, by implication, in all the other articles.

  59.  The circumstances surrounding both these issues are set out in a letter dated 31 May 2002 sent by the Chief Secretary to the Deputy Governor. A copy of this letter is attached to this Memorandum as Annex 9(a)[38]. I also attach, as Annex 9(b)[39] a copy of my letter to Mr Straw dated 30 May 2002 and faxed to him on the same day (five days before the first article in the Guardian).

  60.  I am advised by the Government Statisticians that practically all the statistics that are relevant to economic issues that are contained in the Abstract are separately published in annual, statutory survey reports that are laid annually in the House of Assembly, and in other annual reports of Government departments and agencies that are published. Indeed most of the tables in the Abstract are reproductions of the tables in these other reports, eg the Employment Survey Report, the Air Traffic Survey Report, the Hotel Occupancy Survey Report, the Tourism Survey Report, the Gibraltar Health Authority Annual Report, Port Department Report etc etc.

  61.  At paragraph 44 Mt Straw says, "Apparently if you delve away long enough and hard enough you can get different tables, all right, but that is no way for a Government to operate, you need these brought together."[40]

  62.  (i)  No "delving" is required. The vast majority of this information is readily available in the same form, in official annual reports.

  (ii)  The publication of statistics by the Government of Gibraltar is regulated by long-standing legislation with which there is strict compliance and of which there has been no breach whatsoever.

  63.  I wish to record the fact that despite the exaggerated importance that is now given to this issue, at no time has any concern about statistics in Gibraltar ever been raised with me, or any other Gibraltar Government Minister by any Governor, any Convent official, any Foreign Office Minister or any Foreign Office official. No statistic referred to by Mr Straw (nor any other statistic) have ever been requested by HMG.

  64.  According to the Foreign Secretary his concern was triggered by the state of Gibraltar's entry in the Statesman's Year Book. However, it would appear that Gibraltar's entry is not dissimilar to that of the majority of UK Overseas Territories and Crown Dependencies. I am not aware that he has written to any of those others.

  65.  The suddenness and vehemence of this unjustified assault on the Gibraltar Government's performance in relation to transparency and accountability is particularly surprising and unexpected, not least because of HMG's own previous complimentary pronouncements in this regard.

  66.  At paragraph 86 of Treasury Minute dated July 1998 (Cm 4004), HMG informed the Public Accounts Committee of the House of Commons as follows:

    "The present Government of Gibraltar has made a significant effort to ensure that the principles of accountability and transparency are applied to all Government bodies and companies. The Government of Gibraltar has done this by revising in May 1997 the Estimates system, rather than by passing new legislation. As a result, the accounts for all Government bodies and companies, as well as most public revenue and expenditure, are laid before, and subject to, appropriation by the House of Assembly. They are thus open to public scrutiny.

  67.  This is a far cry from the wholly erroneous impression that Mr Straw has now sought to create. Whether, as the Foreign Secretary says, his letter to me was polite and the reply "bombastic" is a matter of opinion. I disagree with the Foreign Secretary's opinion on both counts.

  68.  Members of the Committee will of course make their own assessments. However, the view of the Gibraltar Government, widely held throughout Gibraltar, is that the whole issue of statistics and transparency has been engineered, exaggerated and then leaked to the press, for extraneous purpose. It is entirely unprecedented for any issue between HMG and GOG to be raised at Secretary of State level in writing directly to the Chief Minister without it having previously been raised and discussed with the Chief Minister by the Governor or FCO officials. How can something that has never been raised before with me, be both so sudden and so serious? Why should it be briefed out to the press so quickly? Why were such wildly inaccurate and incorrect allegations made without checking the true facts first?

  69.  The Gibraltar Government is of the view that the purpose was to distract attention from the sovereignty negotiations with Spain, to undermine public and parliamentary support for Gibraltar in the UK, and to discredit Gibraltar's principal advocate in the UK, the Gibraltar Government.

  70.  The Committee may wish to be aware of the fact that on 1 March 2001, the Costa del Sol (Spain) newspaper in English "the Entertainer" carried a report under the headline "Caruana's position at risk". That article stated that according to high level diplomatic sources "the UK and Spain are reported to have been looking at the possibility of undermining the authority of the Chief Minister publicly because of what they regard as his entrenched position regarding Gibraltar's future". A copy of this Article is attached to this Memorandum as Annex 10[41].


  71.  Much has been said publicly by Mr Straw and Mr Hain, and consequently by the UK media, about Spain's alleged offer of an additional 70,000 telephone numbers for Gibraltar. Nothing however, has been said about the terms of the offer, which are wholly unacceptable to Gibraltar from the commercial, regulatory, jurisdictional and political perspectives.

  72.  The Spanish Government published its offer, and the terms of it, in the Official State Gazette ("Boletin Oficial del Estado") on 20 November 2001.

  73.  The offer (which has been rejected by Gibraltar) amounted to the following:

    (1)  the total integration of Gibraltar's telephone numbering plan into the Spanish numbering plan in that Gibraltar was being allocated "Spanish numbers" rather than (as is the case at present) specified parts of Gibraltar's own numbering plan being accessible from Spain;

    (2)  all the new 70,000 numbers were to be allocated to a Spanish telecoms licensee (Telefonica), who would then administer the 70,000 numbers by sub-assigning them (on application) to Gibraltar telecoms licensees. In other words, Gibraltar licensees would have to apply for numbers, not to the Gibraltar Regulator or the Gibraltar licensing authority, but to a telecoms company in Spain.

  74.  Accordingly, the basis of this offer is that Gibraltar does not have its own telephone numbering plan; to by-pass the Gibraltar Government's ownership of the Gibraltar numbering plan; to put Gibraltar's (and UK's) ability to enforce and comply with our telecoms laws and EU telecoms directives in the hands of Spanish interests; to usurp the powers of the Gibraltar licensing authority; and to usurp the powers and functions of the Gibraltar Telecoms Regulator (effectively making Telefonica the Regulator for Gibraltar telephone numbers).

  75.  Accordingly, Spain's offer has been rejected by all of the Gibraltar Government, the Gibraltar Telecoms Regulator and the Gibraltar Telecoms companies.

  76.  The Spanish Government's "offer" also includes the fact that the current access from Spain to the existing 30,000 Gibraltar numbers via the Cadiz Regional code, (956) will be terminated on 31 December 2002. It will be replaced by the new offer which establishes a new and specific Spanish Regional code for Gibraltar (8563).

  77.  Accordingly, the effect of the offer is that Gibraltar either accepts it (despite its unacceptable terms) or completely loses telephonic links with Spain (since the existing links via "956" will end on 31 December 2002).

  78.  The situation described in outline in this Memorandum is set out in detail in the papers attached to this Memorandum as Annex 11 which comprise:

    (1)  the Spanish Government Royal Decree, dated 16 November 2001 (decree number 21485 of 8 November 2001) with loose English translation.[42]

    (2)  my letters dated 16 January and 18 March 2002 to Jack Straw.[43]

    (3)  the detailed analysis of the Spanish offer by each of O'Connor and Company (lawyers representing the Gibraltar telecom companies);[44] the Gibraltar Government[45] and Verizon[46] (the American shareholder of 50 per cent of the shares in the Gibraltar Telecoms companies).

    (4)  Gibraltar Government Press Release No. 14/2002 dated 23 January 2002 describing and commenting on the Spanish offer.[47]

  79.  In a further and recent development, the EU Commission has decided to treat the Gibraltar Telecoms companies objection to the Spanish offer as "new complaints", rather than as an unacceptable offer of settlement in the existing, long outstanding complaints. A copy of the Commission's letter dated 29 May 2002 in this respect is also attached at Annex 11[48].

  80.  In our view this is a device to enable the Commission to "start again" and to focus on obtaining modifications to the Spanish offer and thus avoid ruling on the 1996 complaints based on Spain's non-recognition of Gibraltar's 350 Code.

  81.  The original complaints were filed in 1996 under Article 82 (old Article 86) of the EC Treaty, which concerns abuses of dominant position by the Gibraltar companies, GNC and Gibtel, against Telefonica.

  When the Commission wrote to Telefonica, it eventually received a letter from the Spanish Permanent Representative in Brussels saying that in not recognising the 350 code, Telefonica was complying with the instructions of the Spanish Government.

  This meant that the Article 82 complaints became an Article 86/82 complaint (old Article 90 and 86).

  In view of what appears to be an evolution of the case law by the European Court of Justice, the companies are contemplating bringing an action against the Commission for failure to act under Article 232 (old Article 175).

Request for a meeting with the Prime Minister

  82.  Gibraltar Ministers and their advisers have kept under review since early this year the question of seeking access to the Prime Minister and the best timing therefore. It was decided in early May that the Chief Minister should seek a meeting with the Prime Minister once it had become known that he was to meet with Senor Aznar on 20 May, a meeting at which the Gibraltar negotiations would be discussed.

  83.  The Chief Minister wrote to the Prime Minister on 7 May 2002. That letter, a copy of which is attached hereto as Annex 12[49], was sent by facsimile.

  84.  In that letter I said to the Prime Minister that I would be grateful for the opportunity to meet him before his meeting with Senor Aznar on the 20 May 2002, and, if that was not possible, before HMG commits itself to any Anglo/Spanish Agreement. I put myself at his entire disposal as to date and time.

  85.  In his reply dated 16 May 2002, the Prime Minister informed me that he would not be able to see me before his meeting with Senor Aznar but expressed the hope that I would continue my dialogue with Jack Straw and Peter Hain.

Self Determination/the Treaty of Utrecht

  86.  As the Committee knows, the Gibraltar view is that the people of Gibraltar enjoy the inalienable right to self determination, untrammelled by the Treaty of Utrecht. HMG advocated and defended this very same view at the United Nations in 1960s.

  87.  The British Government's position since the 1980s is as described by Mr Peter Hain on 6 November in answer to a parliamentary question from Mr David Crausby, ie, "We believe that Gibraltar's right to self determination is not constrained by the Treaty of Utrecht except insofar as Article X gives Spain the right of refusal, should Britain ever renounce sovereignty. Thus independence would only be an option with Spanish consent."

  88.  Even according to this definition of our right to self determination, an Anglo-Spanish joint declaration agreeing joint sovereignty in principle is incompatible with our right to self determination.

  89.  The Committee will be interested to know that the Gibraltar Government has a comprehensive legal opinion from a pre eminent international lawyer and member of the International Law Commission of the United Nations to the following effect:—

    (1)  Article X of the Treaty of Utrecht is contrary to peremptory norms of general international law and therefore cannot be considered as a source of continuing legal obligations. It cannot therefore be construed as curtailing the right of the people of Gibraltar to self determination.

    (2)  Nevertheless, in accordance with established principles of international law, the territorial cession effected by the Treaty of Utrecht remains valid and effective, even though the Treaty itself no longer is.

  90.  Spain justifies her current position over Gibraltar (with all its consequences for the people of Gibraltar) exclusively on the Treaty of Utrecht. Gibraltar has repeatedly asked for this to be referred to the International Court of Justice and tested under international law. Spain (and apparently also now, the UK) refuse. Yet Gibraltar has a pre-eminent international legal opinion which clearly concludes that the Treaty of Utrecht is invalid and ineffective under international law to affect the rights of the people of Gibraltar.

Airport Issues

  91.  At the meeting with the Minister for Tourism and Transport, Mr Joe Holliday, during their recent visit to Gibraltar, Mr Holliday agreed to provide the Committee with background information relating to the usage of the airport. This is attached to this Memorandum, as Annex 13[50].

Transposition of EU Directives

  92.  At the meeting with the Minister for Trade, Industry and Telecommunications, Mr Keith Azopardi, during their recent visit to Gibraltar, Mr Azopardi agreed to provide the Committee with a situation report of Gibraltar's transposition record and current position. Attached to this Memorandum as Annex 14[51] is a copy of a letter of report dated 8 July 2002 from the Government's Legislation Support Unit.

Whose Responsibility is it to respond to Money-Laundering Allegations

  93.  The Committee has asked me to comment on whose responsibility it is to respond to malicious allegations on such matters as smuggling and money-laundering.

  Both Constitutionally and in practice, the Gibraltar Government has no operational control over the Royal Gibraltar Police or the Financial Services Commission. The Governor is constitutionally responsible for the police.

  94.  The Gibraltar Government believes that HMG in the UK has a duty (being constitutionally responsible for our external affairs) to counter-act malicious allegations of smuggling and money laundering against Gibraltar, given that they are capable of inflicting severe damage on the international reputation and thus also on the economic prospects of Gibraltar.

  The Gibraltar Government therefore does all that it can, within the constraints of its resources and reach, to counter-act such statements. However given GOG obvious self-interest in the matter, a rebuttal from a more detached and objective source would carry greater credibility.

  95.  Historically, and despite requests from GOG, HMG has been reluctant to do so. By way of recent example of this, I wrote to the Foreign Secretary on 23 November 2001. The following are extracts from that letter:

    "You will have noticed the flurry of remarkably similar UK press editorials and articles. We will obviously deal with the politics of these ourselves.

    However, there is one aspect of some of them with which I would be grateful for your help. I refer to references to Gibraltar's alleged involvement in smuggling and money-laundering. These allegations are untrue and unfair. Whoever is spinning that line obviously believes that there is some advantage in discrediting Gibraltar in the court of British public opinion at this point in time.

    Given the grave economic damage that such allegations do to Gibraltar, the fact that they are untrue and also the facts that the Governor is constitutionally responsible for law enforcement and you are statutorily responsible for our financial services commission, I would be grateful for your help in dispelling these allegations.

    I would therefore by very grateful if you could see your way to issuing a press statement in the UK dispelling these notions of money-laundering and smuggling in Gibraltar and, to asking your press people to do all that they can to ensure that your statement receives similar press coverage.

    I enclose, for your information editorials in the Financial Times and the Evening Standard and a rather crude piece in the Scotsman."

  96.  The Foreign Secretary replied on 21 December as follows:

    "Thank you for your letter of 23 November. You raised some articles about Gibraltar in the UK press. I am afraid that you are assuming that our press is more biddable than it is. These articles were not written at the behest of Ministers, FCO officials or anyone other than the editorial staff of the papers themselves. You yourself responded in the most effective way, by writing direct to the editors. And I note that the stories have died away.

    As to tobacco-smuggling and money-laundering, we welcome the recent firm measures that your Government has taken to control smuggling, both by amending the Tobacco Ordinance this June and by the earlier steps you took. I also welcome your support for the regulation of the finance centre to the highest standards."

11   Ev 4 Back

12   Not printed. A copy has been placed in the Library. Back

13   Annexes 1(a) to 1(c) have not been printed Copies have been placed in the Library. Back

14   Ev 35-36 Back

15   Ev 36-37 Back

16   Ev 37-38 Back

17   Not printed. A copy has been placed in the Library. Back

18   Ev 38-39 Back

19   Ev 38-39 Back

20   Annexes 1(i), 1(j) and 1(k) have not been printed. Copies have been placed in the Library. Back

21   Ev 39 Back

22   See First Report of the Foreign Affairs Committee, Session 2001-02, Gibraltar, HC 413, pp. 1-7. Back

23   Annexes 1(n) and 1(o) have not been printed. Copies have been placed in the Library. Back

24   Ev 4 Back

25   Ev 3 Back

26   Ev 40-41 Back

27   Not printed. A copy has been placed in the Library. Back

28   Ev 9 Back

29   Not printed. A copy has been placed in the Library. Back

30   Ev 5 Back

31   Ev 5 Back

32   Ibid. Back

33   Ev 41-48 Back

34   Ev 5 Back

35   Government of Gibraltar Public Finances 2002-03. Not printed with this Evidence. Back

36   Ev 52 Back

37   The following articles were included in the evidence, but have not been re-printed: Back

38   Ev 53-55 Back

39   Ev 56 Back

40   Q44 [Jack Straw]. Back

41   Not printed. A copy has been placed in the Library. Back

42   See Back

43   Ev 56-58 Back

44   Ev 58-60 Back

45   Ev 61-63 Back

46   Ev 63 Back

47   Not printed. A copy has been placed in the Library. Back

48   Not printed. A copy has been placed in the Library. Back

49   Ev 63-64 Back

50   Ev 64-67 Back

51   Ev 68-69 Back

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