European Union member states have dropped a proposal to have Spanish police stationed at the borders of Gibraltar in post-Brexit negotiations on movement to and from the British territory.

Gibraltar has been a point of contention between Britain and the bloc, and the rejection of the proposal in a meeting on Tuesday eases tensions, the Financial Times reported.

Located at the southern tip of the Iberian Peninsula, Gibraltar is bordered to the north by Spain. Nearly 96 percent of voters in Gibraltar backed staying in the EU in the United Kingdom's membership referendum in 2016.

The issue of Gibraltar was not part of the Trade and Cooperation Agreement reached by the EU and UK in December 2020. At that time, Madrid and London agreed a last-minute deal to keep Gibraltar's land border open, with the intention that negotiations would happen later at EU level.

In July, the European Commission angered the UK when it proposed that Spanish border authorities, rather than pan-EU border force Frontex, help police Gibraltar's ports. The British rejected this idea, with Dominic Raab, then UK foreign secretary, saying it would "undermine the UK's sovereignty over Gibraltar".

The FT reported that EU ambassadors have instead now proposed that officials from Frontex are stationed at Gibraltar's port and airport alongside local officials. It said this is a relief to diplomats from both sides as there was concern about setting precedents for elsewhere, such as in Northern Ireland, which also has a post-Brexit border issue being addressed.

Spain claims sovereignty over the port of Gibraltar that it ceded to Britain in 1713 after a war, Reuters news agency noted. But it has agreed to put the issue of sovereignty to one side to focus on a side deal with Britain to avoid having a hard EU border.

A hard border would impact almost 15,000 Spanish workers who cross daily from Spain, and which make up half of the region's workforce, agencies said. The port also welcomes some 10 million tourists per year, which accounts for about one quarter of its economy.

One of the goals of the EU-UK talks, which are expected to conclude at the end of the year, is to enable free movement to and from Spain by including Gibraltar in the EU's passport-free Schengen area, said the FT.

The EU has stated that its aim in negotiations is to "establish a broad and balanced agreement" between the bloc and the UK in regard to Gibraltar, "without prejudice to the issues of sovereignty and jurisdiction".