In guidelines unveiling the EU's position in upcoming negotiations for Britain to exit the bloc, a clause stipulates that Spain must have a say over whether any post-Brexit deal applies to the tiny rocky outcrop at the southern tip of the Iberian peninsula Madrid has long wanted back.
Last year, Spain formally presented Britain with a proposal for joint sovereignty of Gibraltar - an offer that nearly everyone on the British overseas territory rejected.
"After the United Kingdom leaves the union, no agreement between the EU and the United Kingdom may apply to the territory of Gibraltar without the agreement between the Kingdom of Spain and the United Kingdom", he said. While Gibraltar voted overwhelmingly against quitting the European Union, it now faces the possibility of losing access to both a source of thousands of workers who cross its border daily and a market for its financial services industry.
This suggests that unless Britain is willing to let its citizens in Gibraltar live with an inferior economic future than those in the United Kingdom, the European Union has effectively handed the Spanish government a veto on Britain's entire future relationship with the bloc.
Gibraltar's chief minister Fabian Picardo has warned against Gibraltar being used as a bargaining chip during Brexit negotiations.
Spain has sought to increase its influence over Gibraltar and the idea of Britain and Spain sharing sovereignty has been rejected at the ballot box.
Picardo said he hoped that the trade deals Britain hopes to negotiate with other countries around the world, including the United States, will also benefit Gibraltar.
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But residents overwhelmingly voted to remain with Britain in two sovereignty referendums in 1967 and 2002.
Insisting that the guidelines would allow Spain "to discriminate against the British people of Gibraltar", he said: "Gibraltar is not going to be a political pawn in Brexit, neither is it going to be a victim of Brexit".
And on Wednesday, British Prime Minister Theresa May pledged her support for Gibraltar.
Gibraltar's border with Spain was closed by former dictator Francisco Franco in 1969 and only reopened in the 1980s.
Liberal Democrat foreign affairs spokesman Tom Brake said: "Theresa May must urgently produce a plan that protects the citizens of Gibraltar, including their businesses and communities".
"We have been firm in our commitment never to enter arrangements under which the people of Gibraltar would pass under the sovereignty of another state against their wishes, nor to enter into a process of sovereignty negotiations with which Gibraltar is not content".