Gibraltar was ceded in perpetuity by Spain to Great Britain under the Treaty of Utrecht 1713. Gibraltar's 2006 Constitution guarantees that Britain will never enter into arrangements that would place the people of Gibraltar under the sovereignty of any other state against their freely and democratically expressed wishes.

Under the Gibraltar Constitution, the United Kingdom is responsible for Gibraltar's defence and foreign affairs. The UK appoints the Governor, who is the representative of the Crown in Gibraltar. However, Gibraltar is largely self-governing through its democratically elected Parliament. This autonomy allows Gibraltar to maintain its independent tax status and enact laws independently of Britain, and its finance centre has flourished under these conditions.

Gibraltar's legal system, which is largely based on English law, is overseen by an independent judiciary. Gibraltar's Constitution guarantees the fundamental right of individuals, and the Gibraltar courts must take into account decisions from the European Court of Human Rights on such matters.