UK Spain Row Causing Problems for Online Gaming Companies

Britain’s relationship with Spain has been threatened by the ongoing spat over Gibraltar. In his comments a Foreign Office minister warned how worried the British government is over the ongoing row over Gibraltar. David Lidington, Europe minister, told reporters there was a risk that the argument could overshadow other parts of the countries relationship. In an interview with reporters from the Financial Times Mr. Lidington stated “There is clearly a risk that this will cloud the bilateral relationship. I think it would be a tragedy were that to be put at risk but I think it’s important that no one misunderstands the seriousness of our commitment to Gibraltar and to the democratic right of the people of Gibraltar to remain British.”

Lidington’s comments reflect the concerns of the British government. Some have likened the dispute to the dispute with Argentina over the Falkland Islands. One UK official told the Financial Times “The risk now is that this becomes like the Falklands, where we can’t talk to them about the economy or security or anything else without Gibraltar being the main focus of the discussion.” Mr. Lidington is the first UK official to point out how serious the long term consequences of the argument could be. Earlier the Spanish government said they would impose a hefty entry fee that would destroy the economy in Gibraltar.

Gibraltar is home to many online gambling firms including several internet bingo operators. Most moved to Gibraltar because of its favorable tax regime. Gaming operators in Gibraltar only pay a 1% tax as opposed to 15% in the UK. The argument began in August when Gibraltar built an artificial reef to discourage Spanish fishermen from using drag nets. The Madrid government retaliated by conducting ‘enhanced checks’ of cars entering Spain tying up traffic for hours and inconveniencing workers. On September 21st a Spanish demonstration by bikers has threatened to cross the border.

The UK has asked the European Commission to intervene to stop the enhanced auto checks. UK officials are waiting for a team of observers from the Commission to report on the border situation. British officials are in the process of collecting evidence to support a possible legal challenge. Lidington told reporters “The commission is due to send a team down there in September so I would hope it’s within days or a very few weeks. They are the guardian of the treaties and the Gibraltarians are EU. It’s not part of the single market in goods so Spain is entitled to have checks. But those checks are ones that should be proportionate and necessary and not politically motivated.”

In addition to the border situation online bingo and gaming firms licensed in Gibraltar are getting ready to mount a legal challenge to the UK’s new 15% point of consumption tax that goes into effect in December 2014.