* Gibraltar leader uncompromising over fishing waters row
* Floats offer of tax deal with Madrid government
By Fiona Ortiz
GIBRALTAR, Aug 15 (Reuters) - Gibraltar is confident it will win any legal case brought by Spain in a dispute over fishing waters and border controls, the head of the British territory told Reuters, challenging the Madrid government to meet him in court.
A defiant Fabian Picardo, Gibraltar's chief minister, said he welcomed Spain's new willingness to take issues with Gibraltar to international courts, although it has not specified what issues and what tribunal.
"In any fairly constituted international tribunal, Gibraltar will win game, set and match," Picardo said late on Wednesday in his large, intensely air-conditioned office in the sub-tropical British territory near the tip of the Iberian peninsula.
Spain ceded Gibraltar to Britain 300 years ago in the Treaty of Utrecht, but has long sought to reclaim it. Britain considered sharing sovereignty with Spain in the 1990s, but now promises to respect Gibraltar's wishes to remain British.
Tensions over Gibraltar flared up in July when Gibraltar built an artificial reef in what Spain says are shared waters.
The exchange heated up rapidly. Spanish Foreign Minister Jose Manuel Garcia-Margallo said "the party was over" for Gibraltar, which enjoyed softer treatment from the previous Spanish Socialist government.
Picardo, an Oxford-educated lawyer who has governed the territory's 30,000-strong population for 18 months, said he did not regret saying Spain was acting like North Korea, colourful language he said was a response to Spain's inflammatory language.
He said Spain was manufacturing problems with Gibraltar to distract its citizens from a corruption scandal involving alleged illegal financing in the ruling party, a charge echoed by Spanish opposition parties.
Picardo said he was pleased that Garcia-Margallo had opened the door to international arbitration.
"Those are the first words that Mr. Margallo has uttered that I have ever welcomed. I very much hope that he sees through on that, and that we do meet in the more civilized environment of an international court, to make our arguments on all of those issues," said Picardo, just back from holiday in Portugal.
Gibraltar is financially self-sufficient but Britain operates a military base on the tiny peninsula, which uses the British pound and has a strongly British culture, although many people here have some Spanish ancestry.
In retaliation over the reef, which all sides recognise will obstruct a small number of Spanish fishing boats, Spain ordered its border agents to make very thorough searches of cars.
The detailed searches have sporadically caused lines of up to 6 hours, making it hard for Spanish workers crossing into Gibraltar every day and potentially putting off tourists that are a backbone of Gibraltar's small but thriving economy.
Gibraltar and Britain have complained to the European Commission, which says it will look into whether Spain is being heavy-handed at the border.
Meanwhile, Spain has threatened to block the ship-fuelling business in Gibraltar's port, tax inspections of Gibraltarians with property in Spain, and even close Spanish airspace to the flights that bring tourists and business people from Britain.
Picardo, whose office is decorated with a large portrait of Queen Elizabeth II, said he did not want to discuss how Gibraltar manages its waters but was open to talks on a tax accord with Spain.
"One of the things Spain needlessly complains about is Gibraltar's position as a financial services centre, insisting that Gibraltar is a tax haven," he said.
"I'm putting on the table now the possibility of discussing with Spain a double taxation or tax information agreement." Gibraltar would share information on Spaniards with accounts or investments in Gibraltar, Gibraltarians who live in Spain, or Spaniards who work in Gibraltar would not be subject to income tax in either jurisdiction.
Gibraltar's economy has boomed as its 10 percent corporate income tax attracted financial services firms such as insurance companies as well as on-line gambling outfits. Gibraltar says it complies with international money-laundering and tax rules and is not blacklisted as an uncooperative tax haven.
"We won't allow lies like that to endure," Picardo said. (Reporting by Fiona Ortiz; Editing by Jon Boyle)