The decision to award the MOD contract to Serco was an unwelcome piece of news at the start of a new year. Much time and effort had gone into preparing what had become known as the in-house option, only to be trounced at the final hurdle on the grounds of cost. Local concern at the MOD’s decision was clear to see in the numbers of people demonstrating just days after the announcement was made.

In the increasingly budget constrained climate of the MOD, the quest for value for money has become the deciding factor in whether to keep or cut. Various groups pleaded for special treatment. After all, they said, the cost difference between the local bid and that of the winner was miniscule given the MOD’s annual defence budget. This was to miss the point. In an outsourced world, accountability is all and UK government ministers have become super-sensitive to accusations of the inefficient use of taxpayer’s money. The realpolitik of the MOD’s decision may deliver some savings over the short to medium term but the little local difficulty may in the end cost them dear.

It is clear that the Navy has become less reliant on Gibraltar over the years as the world’s trouble spots spring up further afield. British warships collect stores and the sailors enjoy shore leave in Spanish and Portuguese ports rather than come to the Rock. Sometimes entire complements are flown out to a ship so that it does not need to return to its home base in Portsmouth. It’s quicker and saves money. But it leads to other operational problems for both crew and equipment.

Death by a thousand cuts
The symbiotic but at times strained relationship between the MOD and its overseas bases, highlights the emerging confidence of the bases’ hosts. Gibraltar today is far less reliant on the MOD as an economic driver than it was 20 years ago. As the historic threat dissipated and morphed into a series of different but no less deadly guises, Gibraltar has been unable to escape the cuts imposed by successive UK defence reviews. In 2004 Geoff Hoon, the then UK Defence Secretary, handed over to the Gibraltar Government a significant chunk of the MOD’s estate on the Rock. Nevertheless the MOD still exerts considerable control on the remaining parts even though much of it is not maintained, much less used.

The MOD needs to decide if it wants to keep Gibraltar as a base. If it does, it should be prepared to invest in it, rather than see just how much it can squeeze it to accommodate cost savings dictated by the UK Treasury.

Friendly relationships are a two-way street. That does not mean that friends always need to agree, but to be healthy neither should take each other for granted. Otherwise the inequality will sour the relationship.

This is not a call for a blank cheque for the local workforce. Our members, virtually all of who operate in the private sector, know all too well the harsh reality of having to compete. It is a call for a realisation by the MOD that, although Gibraltar values the MOD’s presence, it is not at any price.

The environment is now at the top of the political agenda in the UK following the publication of the report on climate change by Sir Nicholas Stern, a highly respected economist.

In his report, Sir Nicholas concluded that the world was heading for an economic catastrophe unless it halted the pollution that leads to global warming.

It was a sobering view that mixed scientific analysis with hard business fact and resonated with governments around the world. In Gibraltar, where such debate might once have filled just a few column inches in the local press, the Stern Report hit home too.

The Gibraltar Government acknowledged that the global scope of the author’s conclusions bore direct relevance locally, and should serve as an impetus to further focus efforts on green awareness and, more importantly, action.

“Solutions to global problems start with local contributions,” said Environment Minister Jaime Netto at the time.

While no one could fault such a laudable assessment, for many in Gibraltar, the proof of the Government’s commitment – and society’s too, for that matter – is not in words, but in concrete, tangible efforts.

But with green issues figuring prominently and consistently on the agenda for public debate, there are signs that concerted steps are being taken in the right direction.

Even before the Stern Report was published toward the end of last year, the Gibraltar Government had finally moved to sign an Environmental Charter that set out, in general terms, its commitment to environmentally sustainable policies.

The document listed 10 guiding principles including:
• To recognise that all people need a healthy living environment for their well-being and livelihood and that all can help to conserve and sustain it.
• To use Gibraltar’s natural resources sensibly, with regard to the needs of present and future generations.
• To identify environmental opportunities, costs and risks in all policies and strategies.
• To seek expert advice and consult with relevant parties on decisions affecting the environment.
• To aim for solutions which benefit both the environment and development.
• To contribute towards the protection and improvement of the global environment.
• To safeguard and restore native species, habitats and landscape features, and control or eradicate invasive species.
• To encourage activities and technologies that benefit the living environment.
• To control pollution, with the polluter paying for prevention and remedies.
• To study and celebrate our environmental heritage as a treasure to share with future generations.

The charter was the first step in a broader commitment that will be followed by an Environmental Action and Management Plan, to include objectives and a roadmap of how these will be achieved.

“The objectives will need to be set at realistic, achievable levels,” the Environment Ministry said. “A wide spectrum of organisations and different measures will have to be involved in drawing up the base information, the legal framework and the practical elements in order to be successful.”

The plan will cover a number of issues such as the environment/development interface, habitat management, pollution, energy and technology, natural disasters, environmental heritage and development and planning. Establishing and implementing its various strands will follow a staggered timetable, so as to be achievable in the short, medium and long term.

Within weeks of the charter being signed, tangible developments were evident. A climate forum was set up locally, for example, to explore alternatives to traditional fossil fuel energies at a time when Gibraltar, according to the Government’s own estimates, faces an almost three-fold increase in carbon emissions over the coming years on the back of economic growth and a parasitic demand from major property developments around the Rock.

The Environmental Safety Group, a non governmental organisation that has campaigned vociferously and persistently for a cleaner Gibraltar, welcomed the move, though it laced its support with a healthy dose of scepticism. It wanted actions, not just words.
“A report such as that produced by Sir Nicholas Stern, an expert economist, has helped raise the fearful spectre of what a ‘business as usual’ attitude could ultimately cost in financial terms and economic security,” the ESG said at the time.

”The report recommends action today and we urge our own Government and ancillary expert panels and forums to also adopt this sense of urgency.”
Alongside think tanks such as the climate change forum, the Government also moved to bring the business community into the fold of its plans for the environment. At a seminar in September, it announced new regulations – stemming from EU directives – allowing greater public access to official environmental documentation, including environmental impact assessments for major development projects. The idea is to enable close public scrutiny of the decision-making process in respect of any official project with a significant impact on the environment, though whether such transparency will work in practice, remains to be tested. If it does, it will mean fewer opportunities for business – or Government, for that matter – to cut corners. For reputable operators, this should be welcome news.

The same seminar – which was attended by government officials but will be followed with briefings for the business community – also provided details of the Green Business Programme, which aims to help companies implement environmentally-friendly business practices in the workplace. The Government said it wanted to lead by example in this field but hoped to gain wide support from the private sector, to ensure that a strong and sustainable practice can be achieved.

Mr Netto promised that the Green Business Programme would not be a one-off exercise that entities could then forget about. He said the Government intended to monitor the development of the programme and would encourage the continuous improvement of sustainable practices within organisations.

All of this was happening against a background of continued concern about the impact of industry on communities around the Bay of Gibraltar. The focus was not just on the obvious targets such the Cepsa refinery, but also on activities such as bunkering in the bay. Environmental campaigners – at least, those who adopt realistic stances – acknowledge that industry in this region creates jobs and wealth and should not simply be marginalised. Groups such as the ESG and the Gibraltar Ornithological and Natural History Society, Gibraltar’s veteran green NGO, have adopted a pragmatic ‘carrot and stick’ approach to the issue, maintaining relentless pressure while at the same time trying to engage with polluting companies. Those same companies, meanwhile, insist on their green credentials and maintain that, while there is always room for improvement, their track record is far from bad. This is a long running war of words to which there is no immediate end in sight.

An interesting insight into the tensions between business and the environment was offered recently by an international heavyweight who paid a short visit to the Rock.
Professor Alexander Likhotal, president of the Green Cross International, was here to explore possible synergies between the organisation’s global operations and the logistics set-up run by Toyota Gibraltar Stockholdings in support of UN relief work.

The Green Cross, which focuses its efforts on the environmental impact of war and natural disasters, hopes to build closer links with the humanitarian efforts that inevitably take precedent in conflict zones. The logic is that without regeneration, devastated environments eventually add up to greater human suffering.

Professor Likhotal stressed the need to engage with business, a message that neither Gibraltar nor neighbouring Spanish towns can afford to ignore. He was adamant that business had a pivotal role to play in protecting the environment, and unlike some environmental activists, did not blame companies for everything that goes wrong with the environment. Instead, he pointed to a bigger picture.

“In my judgement it is the problem of the modern economy, which is decoupled from social constraints and connections,” he told the B2B during an interview. “I’m not saying business is angel-like, but we should not demonise it either.”

In this respect, it is perhaps fitting that one of the most significant tangible steps taken last year came from GONHS, which has campaigned on behalf of the environment for many years.
GONHS has prepared a ground-breaking Biodiversity Action Plan for Gibraltar, a weighty and well-researched report entitled “Planning for Nature”.

The document contains information on Gibraltar’s flora and fauna and presents this within the context of the international conservation obligations. It is a solid foundation, a detailed blueprint on which to build. GONHS hopes the document will serve as a tool for planners and developers by highlighting areas and species that need to be safeguarded.

The report, prepared by Charles Perez, was launched in the presence of a large number of local developers, surveyors, architects, NGOs and representatives from government departments.

“Gibraltar is today at a crossroads with a lot of developments, ideas, and political energy, and we must not forget our responsibilities to the environment both locally and internationally,” said GONHS General Secretary John Cortes, when the plan was presented last month. “If we get it wrong, we must live with the consequences.” And beyond this, there are Gibraltar-based entrepreneurs who have embarked on exciting projects that are pushing back the boundaries of renewable energies and could open up new opportunities for the local economy.

From its base in the New Harbours business park, local company Energy Replay is working with its UK partners to develop a self-sufficient system that uses solar energy and hydrogen fuel cells to generate pollution-free electricity. The only by-product of the process is water. No fumes, no carbon emissions, no waste.

Driving Energy Replay and its sister companies in the UK, is a quiet, unassuming man called Paul Young, a Gibraltar resident with a passion for all things green.

Mr Young believes Gibraltar is well placed to become a leading light in Europe for both the development and the use of clean energy technologies.

“The thing about Gibraltar is that because it’s a small place, it’s an ideal reference site,” he told the B2B during a recent interview.

“I also look at Gibraltar Ltd,” Mr Young added, a reference to the local economy. “To have another revenue stream – particularly in terms of production [of renewable energy technology] – can’t be a bad thing.”

The European Court of Justice [ECJ] judgement last September in the Azores Case, was widely welcomed as positive for Gibraltar’s own taxation case, which is still before the court.

The ECJ must decide whether a proposed new system to replace Gibraltar’s existing tax framework is compatible with EU rules on state aid.

In the Azores case, the court had to decide what criteria applied when assessing if a tax regime breached EU state aid rules on the grounds of regional selectivity.
In simple terms, the issue hinged on deciding whether or not the Azores, a Portuguese island territory, was entitled to have a different tax regime to that in place in mainland Portugal, and on what grounds.

A key issue in the reaching the ruling was the autonomy of the regional government in question.

The court upheld the three tests put forward in a reasoned opinion by its advocate general, in order to evaluate whether a regional tax regime is truly autonomous: institutional, procedural and economic autonomy.

This means that a regional tax regime must be approved by a public body with a considerable degree of autonomy and without the interference of the central government in the approval process, and that its financial impact must be borne by the autonomous government, without compensation from the state authorities.

For the Azores itself, the ECJ ruling was not good news.

The court ruled that the regional government of the Azores did not meet the requirement of financial autonomy, confirming the European Commission’s view that the tax rate approved by the islands’ authorities - a rate lower than that applicable in mainland Portugal – amounted to state aid.

But the arguments used to reach that decision, overrode the Commission’s automatic assumption that any regional tax incentives were selective and therefore potentially in breach of state aid rules, on the grounds that they did not apply the territory of the member state as a whole.

For Gibraltar – which enjoys, particularly in the light of the new Constitution, a vast degree of institutional, procedural and economic autonomy – the ECJ’s decision was thus good news.

Shortly after the ruling was published, the Gibraltar Government said it believed the court’s decision vindicated Gibraltar’s own arguments as to why it is entitled to have a separate and different tax regime to that of the UK.

This is the core issue in the Gibraltar case and the court is now likely to follow the precedent set in the Azores case.

“The judgement therefore confirms that the principles to be applied in deciding this issue, are the very principles upon which the Gibraltar Government’s case is based and pleaded,” the Gibraltar Government said at the time.

The Government is encouraged, in particular, by the fact that in para.68 of the judgement, the court sets out the principles to be applied, by upholding the UK Government’s arguments.”

“Those arguments are the same ones as both the Gibraltar and UK
Governments are making in the Gibraltar case.”

“This judgement is therefore extremely helpful to our case.”
Similar sentiments were expressed within the financial sector, not least by key players in the online gaming industry, one of the newest strands of Gibraltar’s economy.

Leading gaming company PartyGaming’s group Finance Director Martin Weigold told specialist UK magazine Accountancy Age, that the ruling had removed the risk that gaming companies based in Gibraltar would have to pay the full UK tax rate of 30%. ‘It’s effectively removed one of the risks associated with the replacement tax regime that will come into effect at the end of 2010,” he said.

“We expect a low-cost tax regime that’s non-discriminatory to take its place when the tax-exempt scheme is phased out.”

Implementation of the trilateral agreement signed in Cordoba last September is now in full swing.

On December 16, the inaugural Iberia flight from Madrid touched down in Gibraltar airport amid much fanfare and under the close scrutiny of the world’s media.

It was the first flight from Spain in nearly three decades, but it was doubly significant because it carried the first serving Spanish minister to visit Gibraltar in a generation.

On the tarmac at North Front, Bernardino León, Spain’s Secretary of State for Foreign Affairs, embraced Chief Minister Peter Caruana and so signalled a new era that would have been unthinkable just four years ago in the shadow of the joint sovereignty proposals.

The buzzwords now are cooperation and understanding on mutually beneficial issues. The promise is of cross-border social, cultural and economic progress. The thorny matter of sovereignty has been set aside, with the core positions of all three sides protected.

Gibraltar is now linked by a scheduled daily return flight to the Spanish capital. By May, a second daily service operated by local airline GB Airways will also be up and running.

The Iberia flights are the most prominent of the changes stemming from the four core elements of the Cordoba agreement, which include expanded airport use, Spanish pensions, telephones and smoother frontier flow.

Yet there is progress too on less visible, though none the less important aspects of the agreement.

Changes to telephony between Gibraltar and Spain are not due to come formally into operation until February, when Gibraltar mobile phone users will be able to roam in Spain, and diallers will be able to use the 350 prefix that Spain had for years refused to recognise for political reasons.

Spanish telephone operator Telefónica has already told clients about the forthcoming changes.

“In compliance with the Spanish Government’s agreement on telecommunications matters, with effect from 10 February 2007, telephone calls destined for Gibraltar should be effected by dialling the international access code ‘00’ followed by the Gibraltar code ‘350’ [and instead of using the current 9567 code] ”, it told customers in a note included with December bills.

Telephone technicians are already at work on either side of the frontier fence. Local mobile phone users have noticed, for example, that they can occasionally pick up signals while roaming in Spain. Sometimes, it is also possible to place a call to Gibraltar using the 350 prefix.

At the border itself, the changes are more evident.

A new two-lane system has been put in place on the Spanish side, ensuring that coaches and cars carrying goods to declare use a separate lane to routine vehicle traffic. The theory is that this will help ease delays and, so far at least, the set-up seems to be working.

Also up and running is the transfer bus for passengers heading to and from La Linea and Gibraltar Airport. Passengers arriving on the bus from La Linea to catch flights to Madrid, undergo security checks at a separate building on the tarmac, already dubbed Terminal 2 by airport workers.

The bus takes about 30 minutes and operates a regular schedule between the La Linea coach terminal and the airport, though some passengers who have used it say it is easier and faster to simply walk across. The key differing factor is that those who opt to use the bus are treated as being in transit and, provided they remain ‘airside’ in the Gibraltar terminal and do not cross Gibraltar’s customs and immigration control points in the terminal, will not normally be subjected to customs and immigration controls in Gibraltar. Those who cross on foot have to undergo the usual checks.

In December the House of Assembly, in its last session before it becomes the Gibraltar Parliament under the new Constitution, approved amendments to existing legislation to enable local customs and immigration officials to waive controls under certain circumstances, namely for passengers arriving in Gibraltar from Madrid but in transit to Spain. Chief Minister Peter Caruana said these administrative waivers would take place “without prejudice” to Gibraltar’s legal ability and jurisdiction to enforce controls at any point. He said the amendments were aimed at providing officials on the ground with “incontrovertible certainty and clarity” as to the waiver system.

December also witnessed the first meeting of the Permanent Joint Liaison Committee, a new forum set up to consider technical issues arising from the implementation of the Cordoba airport agreement. The first meeting took place at the Rock Hotel and reviewed the implementation of the arrangements following the commencement of flights. The Gibraltar Government has already initiated planning and design works for the construction of the new air terminal and these issues were also discussed at the forum. The new terminal will connect directly to the border and it is therefore necessary to coordinate the location with Spanish officials.
Progress is also evident on the Spanish pensions’ issue, with the first payments due to be made in April of this year.

The British Government expects Spanish pensioners to sign up en masse to the settlement offer in the Cordoba agreement and is braced to foot a bill of up to £80m, though officials cannot give an exact figure at this stage.

Affected pensioners have already received letters from the British Government setting out the terms on offer and La Linea’s town council said last month that 600 pensioners had already sought advice on signing up to the deal.

The UK will offer to pay a lump sum to each pensioner in exchange for withdrawing from the Gibraltar Social Insurance Fund and giving up further corresponding claims in relation to it.

The average total lump payment will be about 6200 Euros and will be paid in two instalments, April 2007 and April 2008.

The Cordoba agreement provides a settlement to the long-running issue of pensions paid to Spanish workers affected by the 1969 border closure.

Local pensioners had initially expressed concern about the implications of the Cordoba agreement on their incomes but are now satisfied following news that they will receive a 65.2% increase in their pensions as from April 2007 and that Community Care will remain unaffected.

Francesco Bertagnin has recently joined Marrache & Co to head their new offices in Sotogrande.

Francesco, originally from London, is fluent in English, Spanish and Italian. A member of the Association of Taxation Technicians, he graduated from Middlesex University with BSc Hons in 1994 and has been working for over eight years in the tax profession (three of which have been in Gibraltar).

He has specialised in advising High Net Worth individuals throughout his career and has dealt with clients from all types of backgrounds, from sportsmen and property developers, to landed gentry. He has also been fortunate enough to work on a number of high profile corporate companies during his career.

He and his team are all looking forward to moving into the new offices in Sotogrande next month and said that “from the quality of the office to its location and the team that we have put together we now have everything in place to extend our first class service into Spain”.