The British government has expressed disappointment after the European Commission found Spain has broken no EU rules by stepping up checks on the border crossing into Gibraltar.
The commission sent a team to investigate after a row broke out in the summer when Spanish authorities tightened frontier controls, allegedly to crack down on tobacco smuggling.
But the move came after Gibraltar had created an artificial reef off its coast, angering Spanish fishermen.
Today a commission report said there was no evidence that the Spanish government at the border had breached any EU rules by initiating blanket checks on cross-border movements.
"We are disappointed," said a British government spokesman.
"Our position is that the action Spain has taken is illegal."
But Britain welcomed the fact that the commission recommends that Spain carry out "targeted" checks in future "in order to reduce the large amount of random border controls".
However, the report also recommends the British government take action to ensure "non-systematic checks" on travellers and their belongings leaving Gibraltar.
This is based on risk-analysis, as well as developing "exchange of intelligence on tobacco smuggling" with Spain.
The report gives both sides six months to respond to the recommendations.
Brussels "reserves the right" to revise its view on the legality of Spanish action and "pay another visit" to the Spain-Gibraltar crossing point if necessary.
The commission said it had received many complaints about delays of up to eight hours at the Gibraltar frontier caused by Spain's strict checking system.
The British government believes the checks were imposed as direct retaliation for the creation of the artificial reef made up of 74 concrete blocks dropped into the sea in disputed waters.
Britain says the move was intended to improve the sea life environment.
Spain claims it was part of long-standing tensions between the UK and Spain over fishing rights.
