Gibraltar has a special relationship with the European Community, which is different from any other colony of a member state.
Under the Treaty of Rome 1973 and the UK Act of Accession of the same year, Gibraltar was classified as a dependent territory of the United Kingdom. Although Gibraltar has its own Parliament which is responsible for passing legislation, including European Community Directives, the UK Government is responsible for Gibraltar’s foreign affairs, including their relationships within the European Union.
As part of the arrangements for its attachment to Britain within Europe, Gibraltar was granted derogation from three principal elements of European law – the Common Customs Tariff. the Common Agricultural Policy (Gibraltar has no agriculture as such) and the Value Added Tax rules. The latter can, in the right circumstances, lead to fiscal advantages for insurance operations.
Otherwise Gibraltar has to act as a member state, albeit elements such as regulation of financial activity in theory fall under the remit of the appropriate UK authorities.
Her Majesty’s Government’s response to this situation has been to grant a degree of autonomy to the Gibraltar regulatory authority, the Financial Services Commission, albeit with the prerequisite that UK standards of regulations are applied. In 1996 The UK Foreign and Commonwealth Office declared the GFSC to be a competent authority in Europe, giving it full authority to regulate financial activities and therefore for Gibraltar to access the single European Market for Financial Services.
The Commission is a statutory body corporate established by the Financial Services Commission Act 1989, and whose current status is governed by the re-enactment of that legislation in 2007. It consists of the Chief Executive, as ex officio member, and seven other persons, at least two of whom shall have significant experience of regulation and supervision of finance services business in another jurisdiction. The Commission appoints one of their number as Chairman.
The Chief Executive is appointed by the Commission, acting with the approval of the Gibraltar Government Minister with responsibility for financial services, and the other members are appointed by the Minister with responsibility for financial services, acting on the recommendation of the Commission.
The Chief Executive is charged with the responsibility of supervising institutions carrying on finance business in or from within Gibraltar. He is required to ensure that such supervision complies with any applicable obligation Gibraltar has as a constituent of the European Union and to establish supervisory standards which match those required by legislation and supervisory practice governing the provision of financial services within the United Kingdom, albeit the GFSC retains sufficient flexibility around methodology to be able to make the regulatory pathway an accessible one for Gibraltar’s clients.
This regulatory framework ensure that entities authorised in Gibraltar to carry on licensed activities such as Insurance, Banking etc. will be able, subject to the proper procedures, to take advantage of the single European passport for financial services, and carry on activities in any other European state under its Gibraltar licence.