Hopes rise for deal on Gibraltar

Date: 01/07/1999

By Tim Jones

BRITISH and Spanish negotiators are within reach of a deal over the legal powers of Gibraltar's authorities which would unblock long-awaited EU laws governing company mergers and bankruptcies.

The agreement should also reduce tensions on the border between Gibraltar and Spain, which have sparked European Commission threats of legal action against Madrid, by lifting official obstacles to the free movement of workers.

Diplomats said direct contacts between Spanish Prime Minister José María Aznar and British Premier Tony Blair had unlocked the deal which both sides hopes to clinch next week.

The dispute centres on the powers of Gibraltar's independent authorities, which were given responsibility by London 30 years ago for administering financial services legislation.

While the British government manages Gibraltar's relations with the EU, it is up to the Rock's autonomous financial services commission to ensure that local supervision complies with Union law.

The Spanish refused to agree to a ten-year-old proposal for EU-wide take-over rules at last week's meeting of EU internal market ministers because the text left open the possibility that a 'competent authority' could be appointed to oversee mergers in Gibraltar even though there is no stock exchange on the Rock.

Madrid insists that if the UK is not going to be that competent authority, then international law dictates that Gibraltar should revert to Spanish rule.

Spanish and British legal experts are now drafting a compromise which would ensure that the legislation applied only to existing stock exchanges and would explicitly define how and when a competent authority could be appointed when a new exchange is created.

"All sides will have to compromise and that includes Gibraltar but, if that means they can enjoy the single market in services, then it could be worth it." said an EU source.

Once this obstacle is removed, all 13 other member states have made it clear that they will sign up to the take-overs directive, which is designed to protect the interests of minority shareholders during bids for listed firms.

The legislation specifies that all shareholders of the same securities-class in a target company are to be treated equally, they must have enough time and information to judge the quality of the bid, and a full bid for all stock must be made once a threshold is cleared. Every member state would have to designate an authority to ensure that bidders and targets comply with the rules.

To overcome earlier British objections, the outgoing German presidency said supervision could be carried out by self-regulatory bodies such as the UK's Take-over Panel. The supervisor's decisions could be reviewed by a court but it would be up to national governments to define in what circumstances this could be done.

The Netherlands dropped its opposition to the directive after it was given an extra year to put the law into practice, bringing the implementation period up to four years.

The Anglo-Spanish deal now being finalised could also clear the way for agreement on a long-stalled directive governing the winding up of credit institutions and a German-Finnish initiative to ensure that bankruptcy rulings delivered in national courts are recognised across the Union.

Diplomats say last-ditch attempts by the German presidency to persuade the Spanish to relax their opposition to the 29-year-old plan for a European Company Statute and energy taxation have, however, come to nothing.

Keyword: Take-overs directive.