Premiers bid to end row over Gibraltar

Date: 02/12/1999

By Peter Chapman

BRITISH and Spanish Premiers Tony Blair and José-María Aznar will try to thrash out a deal on the fringes of next week's Helsinki summit to end a long-running dispute over Gibraltar which is holding up a raft of EU legislation.

Diplomats say intensive talks between officials on both sides have made progress but have narrowly failed to produce a breakthrough, and it will now be up to the two countries' leaders to try to broker a deal. "There are one or two key points that will be left to the prime ministers to sort out," said one.

He added that the chances of an agreement at Helsinki were "good", although he admitted that "it would be overstating it" to say the parties were "confident".

A deal on Gibraltar would pave the way for agreement on a number of EU proposals which have been blocked by Spain because of the row over the Rock's status.

The eagerly-awaited takeovers directive has posed particular problems because of Madrid's refusal to agree to anything which would give legal recognition to authorities in Gibraltar, the British colony on the southern tip of Spain.

The planned new rules were approved by the EU's 13 other member states earlier this year after ten years of intense negotiations. But Madrid has blocked their adoption because they would, in theory, mean setting up a Gibraltar-based authority to probe deals involving firms based on the Rock - even though experts claim there would be no need for this in practice because Gibraltar does not have its own stock market.

Other initiatives which could benefit from a deal on the Rock include rules on the winding up of credit institutions, the UK's bid to sign up to parts of the Schengen free-movement accord, various civil law regulations and plans for an electronic database of fingerprints.

Diplomats said a Spanish-UK deal would allow the takeovers directive to be rubber stamped at any forthcoming EU ministerial meeting, such as the 16 December Fisheries Council.

Sources suggested this week that next week's talks between the two premiers would focus on the logistics of any bilateral deal. These include the question of how a possible 'post box' system to allow Madrid to avoid direct day-to-day contact with Gibraltar-based authorities would work in practice. Under the scheme, Spain would communicate with authorities on the Rock via a third-party 'postman'.

The pressure for agreement on the takeover rules intensified last week when the UK's Vodaphone Airtouch launched its massive h124-billion all-shares bid for German rival Mannesmann.

Although the planned legislation would come into force too late to affect this case, German Chancellor Gerhard Schröder said it highlighted the need for pan-European rules to govern takeovers.

Schröder said such hostile bids could wreck a company's culture and there was speculation last week that he wanted to amend the planned takeovers legislation to make acquiring firms offer cash instead of shares in such cases.

But Berlin sources insisted this week that Germany would not try to unravel the laboriously-crafted compromise. Other member states argue that reopening the provisional deal endorsed by Berlin earlier this year would not be in the interests of the 'victims' of takeovers because it would leave the EU with no rules at all.