Gibraltar is a member of the European Union as a dependent territory of the United Kingdom.
However, it was able to negotiate three derogations from the treaty and as such is exempt from the Common Customs Tariff, Value Added Tax and the Common Agricultural Policy.
Gibraltar became part of the EU under Section 227(4) of the Treaty of Rome 1973 and the Act of Accession of the same year, when the UK joined. As a member of the EU, Gibraltar is obliged to enact legislation to comply with EC Directives and all EU Directives apply to Gibraltar. Thus, EU directives are transposed into Gibraltar law (such as Financial Services and Tax Directives) This, combined with improvements in the Regulatory regime, enabled Gibraltar to secure its passporting rights in Europe for financial services. Thus, financial services operating from Gibraltar enjoy the “freedom of establishment” and “freedom of services” elsewhere in the EEA without having to go through separate licensing procedures in each member state (i.e. “passporting”). Moreover, from 2004, the people of Gibraltar are able to participate in elections for the European Parliament as part of the South West England constituency.