Spain's Prime Minister Pedro Sanchez delivers a speech at the Moncloa Palace in Madrid, Spain, Saturday, Nov. 24, 2018. Spanish Prime Minister Pedro Sanchez says Spain will agree to support the Brexit deal after Britain and the European Union agreed to give it a say in the future of the disputed British territory of Gibraltar. (AP Photo/Paul White)
Spain’s Prime Minister Pedro Sanchez delivers a speech at the Moncloa Palace in Madrid on Saturday © AP

Spain has reached an agreement with the EU and UK clarifying the status of the territory of Gibraltar, paving the way for leaders to approve Britain’s Brexit treaty at a summit in Brussels on Sunday.

Spanish prime minister Pedro Sanchez said on Saturday his government would drop its resistance to a Brexit deal after “difficult” but “fruitful” negotiations.

“Europe and the UK have accepted the Spanish demands, and as a result Spain lifts its veto and will vote tomorrow in favour of Brexit,” he said in a televised statement. “The question of Gibraltar is of capital importance for Spain”.

Under the deal, EU27 leaders will adopt a statement tomorrow making clear that Spain will have a veto over any future EU-UK agreement concerning Gibraltar. 

The agreement that has been brokered also includes separate assurances from the British government and the EU27 clarifying that an article in Britain’s Brexit treaty on the future EU-UK relationship does not prejudge the “territorial scope” of any agreements that might be reached. 

Earlier this week, Mr Sanchez threatened to block approval for a Brexit deal unless his government had stronger guarantees about Madrid’s right to control the territory’s inclusion in a future trade agreement. 

The spat arose over the interpretation of article 184 of the UK’s legally binding withdrawal treaty which says both sides will work in good faith towards a trade agreement that will form the backbone of future EU-UK relations. 

On Saturday, the British government clarified in a letter to the European Council that the article “imposes no obligations regarding the territorial scope of such agreements”. The UK added it would still strive to get a bilateral trade deal covering Gibraltar. 

A statement to be adopted by EU27 leaders on Sunday will underline that the territory “will not be included in the territorial scope” of a future EU-UK deal, and that any “separate agreements between the Union and the United Kingdom in respect of Gibraltar” would require Spain’s “prior agreement”, EU officials said. 

The deal saves Sunday’s Brexit summit after Germany’s Angela Merkel and other leaders threatened to boycott if a deal was not complete. 

EU officials worked through the night on thrashing out the details of a solution with Madrid. The final agreement involves the UK letter, two separate statements from the EU27, as well as a letter from the presidents of the European Council and Commission, all providing assurances about Gibraltar’s status.

The agreement was confirmed in a phone call between council president Donald Tusk and Mr Sanchez early on Saturday afternoon.

Theresa May will be in Brussels on Saturday evening for talks with Jean-Claude Juncker, European Commission president, ahead of the summit that starts at 9.30am local time where EU27 leaders are expected to give their blessing to the withdrawal treaty and a declaration on future EU-UK relations.

In a letter to leaders sent on Saturday, Mr Tusk said the EU had now found the “best possible compromise” to ensure there would be no disorderly Brexit, minimising the impact on EU citizens, businesses and governments.

“Given all of the above, I will recommend that on Sunday we approve the outcome of the Brexit negotiations. And although no one will have reasons to be happy on that day, there is one thing I would like to stress: at this critical time, the EU27 has passed the test of unity and solidarity” Mr Tusk said in the letter.

A UK government spokesman said that the talks on Gibraltar has been “constructive and we look forward to taking the same approach to the future relationship”.

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