For well over a year I have been exploring the post-Brexit options for companies based in Gibraltar that cannot continue to do business from Gibraltar after the UK's exit from the EU. The reasons and options are well articulated elsewhere. In recent months, Spain (more particularly, La Linea) has become the focal point of my investigations and I have travelled to Madrid on numerous occasions.

The possibilities for cooperation between Gibraltar and La Linea that takes advantage of what each other has to offer is not just limited to insurance but can be extended equally to other areas including financial services and gaming. It is a point I have repeated previously. Whilst my focus was initially in insurance, I soon realised that gaming offers equal possibilities for interaction between the Campo de Gibraltar and Gibraltar.

This became even more pronounced when Spain announced changes to the fiscal regime in its autonomous regions of Ceuta and Melilla to make these two Spanish enclaves attractive to gaming companies. Ceuta/Melilla were never going to compete with Gibraltar as an international gaming hub nor could this have been the intention. Instead these autonomous regions have a unique offering of their own, namely an entry point into the Spanish online gaming market, which under Spanish law requires a Spanish gaming licence by any entity offering gaming services to Spanish customers irrespective of their jurisdictional location.

Whilst Ceuta-Melilla can in time successfully develop into a Spanish regional gaming centre, Gibraltar-La Linea is always going to be a far more compelling proposition for obvious geographical and infrastructure reasons. Gibraltar is the world's biggest online gaming hub but it has an obvious physical limitation. Whilst the European business accounts for a small part of the overall business transacted through Gibraltar, Malta is currently picking up the Brexit related gaming business that needs a European licensing access point. So during my investigation I asked myself the question, would it be possible to have European focused operations based in La Linea plugged into the Gibraltar gaming infrastructure?

It is important to emphasise that in this business scenario Spain is not in competition with Gibraltar in the jurisdictional sense. Companies that wish to enter the Spanish online gaming market already require a Spanish licence. Instead Gibraltar provides that natural entry point (both geographically and in terms of it's existing infrastructure), and La Linea sits at Gibraltar's doorstep. La Linea, in turn, offers abundant physical space, and the Campo de Gibraltar an equally abundant and skilled workforce. Spain also has the important benefit of a knowledgeable and approachable Spanish Regulator, la Dirección General de Ordenación del Juego.

The possibilities for gaming companies exploring the Spanish online gaming market are primarily:

  1. Establish in an EU jurisdiction and apply for a Spanish gaming licence. This would then require dual licensing (for example, say in Malta and Spain).
  2. Establish a Spanish company and obtain a Spanish gaming licence. This has the advantage of a single regulator.

For companies looking at Ceuta-Melilla, the Spanish authorities have yet to articulate the level of substance they will require for licensing operators to be based in the two autonomous territories. It would be expected that licensing would be subject to the usual requirement for local substance and mind and management (in other words, no brass-plating). This offers interesting opportunities for business interaction between Ceuta-Melilla/Gibraltar/La Linea and even Malta.

For example, a Spanish gaming licence in Ceuta/Melilla (meeting all the requirements of local substance) but with servers and an administrative centre in La Linea plugged into the Gibraltar gaming infrastructure?

There may be other possibilities too. For example, I understand that under Spanish gaming regulations, back-office administrative/call centre functions related to non-Spanish gaming business (no Spanish customers) does not require a gaming licence in Spain - if so, what about a back-office in La Linea with separate licensed entities in Gibraltar/Malta for the non-Spanish market?

In the same way as my much publicised "two way strategy" for insurance business switch between Malta and Gibraltar, this strategy can be implemented in a manner that maximises the opportunities for all territories rather than in competition with one another. Indeed, Malta has the same physical and human capital constraints as Gibraltar but also (unlike Gibraltar) has the disadvantage of being an island geographically detached from mainland Europe. Jurisdictional cooperation therefore makes sense and my investigations so far suggest the odds of this strategy being successful are good. Who is willing to play at the table?

Should any reader wish to discuss any of the above please contact me.

Nigel Feetham

The views expressed in this article by the author are solely those of the author.

The content of this article is intended to provide a general guide to the subject matter. It does not constitute legal advice. Specialist advice should be sought in every case.